<PAGE> 1
As filed with the Securities and Exchange Commission on March 5, 1998.
Registration No. 333-41545
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 1 TO THE
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------------
SOUTHEAST COMMERCE HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Georgia 6021 58-2349097
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification
organization) Code Number)
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
(770) 956-4034
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive
office and place of business)
----------------------------
Richard A. Parlontieri
Chief Executive Officer
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
(770) 956-4034
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
Copies of all communications, including copies of all communications sent to
agent for service, should be sent to:
Neil E. Grayson, Esq. Andrew J. Federico, Esq.
Nelson Mullins Riley & Scarborough, L.L.P. Carlile Patchen & Murphy, LLP
999 Peachtree Street, N.E., Suite 1400 366 East Broad Street
Atlanta, Georgia 30309 Columbus, Ohio 43215
(404) 817-6000 (614) 228-6135
(404) 817-6225 (Fax) (614) 221-0216 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. 33-_________________ [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. 33-_________________ [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE AGGREGATE PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value...... 1,500,000 $10.00 $15,000,000 $4,425(2)
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Previously paid.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
================================================================================
<PAGE> 2
Subject to Completion, Dated March 5, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SOUTHEAST COMMERCE HOLDING COMPANY
A Proposed Holding Company For
Commerce Bank
1,500,000 Shares Of Common Stock
-------------------------------
This Prospectus relates to the offer of a minimum of 550,000 and a
maximum of 1,500,000 shares of common stock, par value $.01 per share (the
"Common Stock"), to be issued by Southeast Commerce Holding Company, a Georgia
corporation (the "Company"), which has been organized to own all of the capital
stock of Commerce Bank (the "Bank").
Sale of the Common Stock will commence on or about ___________. This is
a "best efforts" offering by the Company, and it will be terminated by the
Organizers upon the sale of 1,500,000 shares or May 15, 1998, whichever occurs
first, unless the offering is extended, at the discretion of the Company, for
additional periods ending no later than March 31, 1999. However, the Organizers
reserve the right to terminate the offering at any time after the sale of the
minimum offering of 550,000 shares. Subscriptions are binding on subscribers and
may not be revoked by subscribers without the consent of the Company.
Prospective investors should carefully review the Prospectus before
subscribing for shares. SUBSCRIBERS MUST WARRANT IN THE SUBSCRIPTION AGREEMENT
THAT THEY HAVE RECEIVED A COPY OF THIS PROSPECTUS. See "The Offering -- How to
Subscribe." The Company has established a minimum subscription of 100 shares and
a maximum subscription by any subscriber of 5% of the total number of shares
sold in the offering. However, the Organizers reserve the right to waive these
limits without notifying any subscriber. In addition, the Organizers reserve the
right to purchase up to 100% of the shares of stock being offered hereunder if
necessary to complete the offering. Proceeds of the offering will be deposited
in an escrow account at The Bankers Bank, as escrow agent, pending receipt of
subscriptions and subscription proceeds for a minimum of 550,000 shares and
satisfaction of certain other conditions of the offering. Any subscription
proceeds accepted after satisfaction of the conditions set forth above but
before termination of this offering will not be deposited in escrow but will be
available for immediate use by the Company to fund offering and organizational
expenses and for working capital. See "The Offering -- Conditions of the
Offering and Release of Funds."
INVESTMENT IN THESE SECURITIES INVOLVES SIGNIFICANT RISK AND INVESTORS
SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS
PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
=======================================================================================
Underwriting Discounts Proceeds to the
Price to Public(1) and Commissions (2) Company(3)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................ $ 10.00 $ 0.65 $ 9.35
- ---------------------------------------------------------------------------------------
Total (Minimum).......... $ 5,500,000 $282,750 $ 5,217,250
(Maximum).......... $15,000,000 $900,250 $14,099,750
=======================================================================================
</TABLE>
(1) - (3) See Footnotes on the inside front cover page.
------------------------------------
BANC STOCK FINANCIAL SERVICES, INC.
The date of this Prospectus is ___________, 1998.
<PAGE> 3
Footnotes to the cover page:
(1) The offering price has been arbitrarily established by the Company. See
"Risk Factors -- Offering Price."
(2) The offering will be made on a best-efforts basis by Banc Stock
Financial Services, Inc. as Sales Agent. The Sales Agent's commission
will be 5.5% with respect to shares sold in the offering to certain
investors identified by the Organizers and 6.5% with respect to other
shares sold in the offering, except that the Sales Agent will not
receive any commission on shares to be purchased in the offering by the
Organizers. The Organizers currently contemplate purchasing at least
115,000 shares in the offering. The commissions described above reflect
the payment of a 6.5% commission on all sales other than the 115,000
shares expected to be purchased by the Organizers. The Company has
agreed to indemnify the Sales Agent against certain civil liabilities,
including liabilities under the Securities Act of 1933. See "The
Offering."
(3) Before deducting expenses related to this offering, estimated to be
approximately $150,000. See "Use of Proceeds -- By the Company."
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Securities and
Exchange Commission (the "SEC"). The Company will furnish its shareholders with
annual reports containing audited financial information for each fiscal year and
will distribute quarterly reports for the first three quarters of each fiscal
year containing unaudited summary financial information. The Company's fiscal
year ends on December 31.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933 with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and the Common
Stock, please see the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC also maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission.
The Company and the Organizers have filed or will file various
applications with the Office of Thrift Supervision. Prospective investors should
rely only on information contained in this Prospectus and in the Company's
related Registration Statement in making an investment decision. To the extent
that other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the Office of Thrift Supervision, is inconsistent with
information presented in this Prospectus, such other information is superseded
by the information presented in this Prospectus. Projections appearing in the
applications were based on assumptions that the Organizers believed were
reasonable, but as to which no assurances can be made. The Company specifically
disaffirms those projections for purposes of this Prospectus and cautions
prospective investors against placing reliance on them for purposes of making an
investment decision.
2
<PAGE> 4
SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
OVERVIEW
Southeast Commerce Holding Company, a Georgia corporation (the
"Company"), was incorporated primarily to hold all of the capital stock of its
proposed federal savings bank subsidiary, Commerce Bank (the "Bank"). The
Company will initially engage only in the business of owning and managing the
Bank, and the Bank will focus its core business on first and second residential
mortgages, home equity loans, refinancing, consumer loans, commercial loans,
private banking and SBA lending. Neither the Company nor the Bank has any
history of operations, nor will they commence any business until after the
offering is completed. In addition, the Company may not acquire the capital
stock of the Bank without the prior approval of the Office of Thrift Supervision
(the "OTS").
The thrift charter will allow the Bank to operate in all fifty states
and to branch into any county in the state of Georgia. The thrift charter will
also give the Company more flexibility to pursue strategic opportunities to grow
its customer base and to create cross-selling opportunities to those same
customers. The Company intends eventually to build a multi-site financial
services institution that focuses its core business on community banking as it
relates to real estate and other related areas of commerce. These businesses may
include, but will not be limited to, a residential mortgage company, a wholesale
mortgage company, a small loan finance company, and a property/ casualty
insurance company.
The Company intends to use state-of-the-art technology to offer
electronic banking services and products and provide better service to its
customers. The Bank's operating strategies will be based on its philosophy of
Better People, Better Service, Better Bankingsm.
THE BANK
The Organizers (as defined below) filed an application with the OTS in
October 1997 to charter the Bank as a federal savings bank. The Organizers
expect to obtain preliminary approval of the Bank's application for a charter in
April 1998. The issuance of a charter will depend, among other things, upon
compliance with certain legal requirements that may be imposed by the OTS,
including capitalization of the Bank with at least a specified minimum amount of
capital, which the Organizers believe will be $5,000,000. Additionally, the
Company must obtain the approval of the OTS to become a unitary thrift holding
company before acquiring the capital stock of the Bank.
As a federally chartered savings association, the Bank will have
general authority to originate and purchase loans secured by real estate,
secured or unsecured loans for commercial, corporate, business, or agricultural
purposes, and loans for personal, family, or household purposes. The Bank will
initially emphasize retail banking, home mortgages, real estate development, and
consumer lending needs. The Bank will not be permitted to make non-real estate
commercial purpose loans that exceed 20% of its assets or non-real estate
consumer purpose loans that exceed 35% of its assets. The Bank expects initially
to limit its lending activities primarily to Cobb County, Georgia, and the
surrounding areas.
The principal executive offices of both the Company and the Bank will
initially be located at 100 Galleria Parkway, Suite 400, Atlanta, Georgia 30339.
The Company's telephone number is (770) 956-4034.
3
<PAGE> 5
The Bank's initial office will be located at Paces Summit, located in
historic Vinings, Georgia. Richard A. Parlontieri will be the Chairman and Chief
Executive Officer of the Company, and Louis J. Douglass, III will be the
President and Chief Executive Officer of the Bank. Mr. Douglass has over 30
years of banking experience, most of which was acquired with community banks and
regional banks serving the Atlanta and North Georgia markets. See "Management."
The Organizers presently are engaged in completing the tasks necessary to open
the Bank by the June 1998, although no assurances can be given that the Bank
will open for business or that the projected opening date can be achieved.
THE ORGANIZERS
The organizers of the Company and the Bank (the "Organizers") are Gary
M. Bremer, Richard C. Carter, Louis J. Douglass, III, Terry L. Ferrero, Stephen
R. Gross, G. Webb Howell, Richard A. Parlontieri, Frank E. Perisino, and Donnie
Russell. Additional individuals may be added as Organizers, subject to
regulatory approval. All of the Organizers except Mr. Gross will serve as
directors of the Company and the Bank.
The Organizers (together with members of their immediate families)
intend to purchase an aggregate of at least 115,000 shares of the Common Stock
to be sold in this offering, equal to 20.9% of the minimum number of shares
offered hereby and 7.7% of the maximum number of shares offered hereby, at a
purchase price of $10.00 per share. In recognition of the financial risks
incurred by the Organizers, the Company intends to allow each Organizer to
acquire a warrant to purchase an additional share of Common Stock for each share
he or she purchases in the offering. The Organizers may subscribe for up to 100%
of the shares in the offering (subject to obtaining regulatory approval) if
necessary to help the Company achieve the minimum subscription level necessary
to release subscription proceeds from escrow, and some Organizers may decide to
purchase additional shares even if the minimum subscription amount has been
achieved. Any shares purchased by the Organizers in excess of their original
commitment will be purchased for investment and not with a view to the resale of
such shares. Because purchases by the Organizers may be substantial, investors
should not place any reliance on the sale of a specified minimum offering amount
as an indication of the merits of this offering or that an Organizer's
investment decision is shared by unaffiliated investors. See "The Offering" and
"Management."
THE OFFERING
<TABLE>
<S> <C>
Securities Offered....... Common Stock of the Company, par value $.01 per share
Offering Price........... $10.00 per share
Number of Shares
Offered ............... Minimum 550,000
Maximum 1,500,000
Use of Proceeds.......... The Company will use 75% of the net proceeds of the
offering (subject to a minimum of $5,000,000) to
capitalize the Bank through the purchase of all of
the capital stock of the Bank, subject to regulatory
approval; to pay organizational expenses of the
Company and the expenses of this offering, estimated
to be approximately $150,000; and to provide working
capital. The Company plans to retain all remaining
sums at the Company and initially invest the sums in
United States government securities or as a deposit
at the Bank. The Company may be required by the OTS
to capitalize the Bank at a level in excess of the
minimum of $5,000,000, in which case the Company
would have to receive additional net proceeds in the
offering or obtain additional capital from another
source. The Company has not sought any other source
from which to obtain this capital, and there can be
no assurances the Company would be able to do so.
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C>
IF THE CONDITIONS FOR RELEASING SUBSCRIPTION FUNDS
FROM ESCROW ARE MET AND SUCH FUNDS ARE RELEASED BUT
FINAL REGULATORY APPROVAL TO COMMENCE BANKING
OPERATIONS IS NOT OBTAINED FROM THE OTS OR THE BANK
DOES NOT OPEN FOR ANY OTHER REASON, IT IS POSSIBLE
THAT SUBSCRIBERS COULD BE RETURNED AN AMOUNT LESS
THAN THEIR ORIGINAL INVESTMENT. See "Risk Factors --
Return of Less Than Subscription Amount." The Bank
will use the $5,000,000 received from the sale of its
stock to the Company to pay organizational and
pre-opening expenses of the Bank; to renovate and
furnish the Bank's offices; and to provide working
capital to be used for business purposes, including
paying officers' and employees' salaries and making
loans and investments. See "Use of Proceeds."
Conditions to
Offering............... This offering will be terminated and all subscription
funds (without interest) will be returned promptly to
subscribers unless on or before May 15, 1998 (or such
later date if the offering is extended by the Company
for additional periods not to extend beyond March 31,
1999), (i) the Company has accepted subscriptions and
payment in full for a minimum of 550,000 shares; and
(ii) the Company has obtained approval of the OTS to
acquire the capital stock of the Bank and thereafter
to become a unitary thrift holding company.
Subscription proceeds for shares subscribed for will
be deposited promptly in an escrow account with The
Bankers Bank, as escrow agent (the "Escrow Agent"),
under the terms of an escrow agreement (the "Escrow
Agreement"), pending the satisfaction of the
conditions set forth above or the termination of the
offering. Upon satisfaction of the conditions set
forth above, all subscription funds held in escrow,
including any interest actually earned thereon, shall
be released to the Company for its immediate use. Any
subscription proceeds accepted after satisfaction of
the conditions set forth above but before termination
of this offering will not be deposited in escrow but
will be available for immediate use by the Company to
fund offering and organizational expenses and for
working capital. See "The Offering."
Plan of Distribution..... The Company has established a minimum investment by
any subscriber (together with his or her affiliates)
of 100 shares and a maximum investment of 5% of the
total number of shares sold in the offering, unless
the Company, in its sole discretion, elects to waive
these limits with respect to any subscriber. Proceeds
of the offering will be deposited in an escrow
account at The Bankers Bank, as escrow agent, pending
receipt of subscriptions and subscription proceeds
for a minimum of 550,000 share and satisfaction of
certain other conditions of the offering. The Company
has engaged Banc Stock Financial Services, Inc. as
the Company's Sales Agent to sell shares in the
offering on a best-efforts basis. The Sales Agent
will receive a 5.5% commission with respect to shares
sold in the offering to certain investors identified
by the Organizers (up to 250,000 shares) and 6.5%
with respect to other shares sold in the offering,
except that the Sales Agent will not receive any
commission on shares to be purchased in the offering
by the Organizers. The Organizers currently
contemplate purchasing at least 115,000 shares in the
offering. The Company will also pay the Sales Agent's
expenses in the offering, up to a maximum of $65,000.
</TABLE>
5
<PAGE> 7
RISK FACTORS
An investment in the shares offered hereby involves certain risks,
including, among others, lack of an operating history, dependence on key
employees of the Bank, significant control of the Company by the Organizers,
absence of an existing market for the Common Stock and lack of assurance that an
active trading market in the Common Stock will develop, no intention to pay
dividends in the foreseeable future, and competition from a number of other
financial institutions with substantially greater financial and other resources
than the Bank will have. See "Risk Factors."
6
<PAGE> 8
RISK FACTORS
An investment in the shares offered hereby involves certain risks. A
subscription for shares should be made only after careful consideration of the
risk factors set forth below and elsewhere in this Prospectus and should be
undertaken only by persons who can afford an investment involving such risks.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
RETURN OF LESS THAN SUBSCRIPTION AMOUNT
The amounts paid by subscribers in this offering will be held in escrow
until (i) the Company has accepted subscriptions and payment in full for a
minimum of 550,000 shares; and (ii) the Company has obtained approval of the OTS
to acquire the capital stock of the Bank and thereafter to become a unitary
thrift holding company. If these conditions are not met by May 15, 1998, or by
such subsequent date, not beyond March 31, 1999, to which the offering may be
extended by the Company, all subscriptions will be returned promptly in full,
without interest. All interest earned thereon shall be used by the Company to
fund organizational expenses. If these conditions are satisfied, the
subscription amounts held in escrow may be paid to the Company and shares issued
to subscribers, and all interest earned on the subscription proceeds will be
retained by the Company. Once the Company has met the conditions for the
offering, the Escrow Agreement will be terminated and any subscription proceeds
accepted after satisfaction of the conditions set forth above but before
termination of this offering will not be deposited in escrow but will be
available for immediate use by the Company to fund offering and organizational
expenses and for working capital. When subscription amounts are received by the
Company, the Company will use a portion of the proceeds to repay the Organizers
the amounts advanced by them for organizational and offering expenses. The
Company will then fund future expenses out of the subscription amounts received.
If the conditions for releasing subscription funds from escrow are met
and such funds are released but final regulatory approval to commence banking
operations is not obtained from the OTS or the Bank does not open for any other
reason, the Company's board of directors intends to propose that the
shareholders approve a plan to liquidate the Company. Upon such a liquidation,
the Company would be dissolved and the Company's net assets (generally
consisting of the amounts received in this offering plus any interest earned
thereon, less the amount of all costs and expenses incurred by the Company and
the Bank, including the salaries of employees of the Bank and other pre-opening
expenses) would be distributed to the shareholders. In such event, the Company
will have incurred numerous expenses related to the organization of the Company
and the Bank, and the amount distributed to shareholders may be substantially
less than the subscription amount, and in an extreme case shareholders may not
be returned any amount.
NEW ENTERPRISE
The Company and the Bank currently are in the organizational stage, and
neither has any operating history. As a consequence, prospective purchasers of
the shares have limited information on which to base an investment decision. As
a holding company, the Company's profitability will depend upon the Bank's
operations. The Bank's proposed operations are subject to the risks inherent in
the establishment of any new business and, specifically, of a new bank. The
Company expects that the Bank will incur substantial initial expenses and may
not be profitable for several years after commencing business, if ever.
Shareholders are likely to experience dilution in the book value of the Common
Stock due to operating losses expected to be incurred during the initial years
of the Bank's operations.
DEPENDENCE ON KEY EMPLOYEES
As a new enterprise, the Company and the Bank will be materially
dependent on the performances of Richard A. Parlontieri, who will be the
Chairman and Chief Executive Officer of the Company, and Louis J.
7
<PAGE> 9
Douglass, III, who will be the President and Chief Executive Officer of the
Bank. The loss of the services of Mr. Parlontieri and Mr. Douglass or their
failure to perform their management functions in the manner anticipated by the
Organizers could have a material adverse effect on the Company and the Bank. The
Company has entered into a letter of employment with Mr. Douglass. See
"Management -- Employment Agreements."
CONTROL OF THE COMPANY; PURCHASES BY ORGANIZERS
The Organizers, all of whom (other than Mr. Gross) will serve as
directors of the Company and the Bank, and members of their immediate families
intend to purchase an aggregate of at least 115,000 shares, equal to 20.9% of
the minimum number of shares offered hereby and 7.7% of the maximum number of
shares offered hereby, at a purchase price of $10.00 per share. Additionally, in
recognition of their acceptance of the financial risks incurred in connection
with the organization of the Company and the Bank, subject to obtaining
regulatory approval, the Organizers will be granted, for nominal consideration,
warrants to purchase one share of Common Stock for each share purchased by them
in this offering. See "Management -- Stock Warrants." Assuming that the
Organizers purchase the indicated number of shares in this offering, and
assuming all warrants issued in conjunction with shares purchased by the
Organizers are exercised, the Organizers would own, as a group, 35.1% of the
Common Stock to be outstanding upon the completion of this offering and exercise
of the warrants if the minimum number of shares is sold and 14.2% of the Common
Stock if the maximum number of shares is sold and the warrants exercised.
Organizers may purchase additional shares in the offering and additional persons
may be named as Organizers, subject to obtaining regulatory approval. The
Organizers may subscribe for up to 100% of the shares in this offering if
necessary to help the Company achieve the minimum subscription level necessary
to release subscription proceeds from escrow, and some Organizers may decide to
purchase additional shares even if the minimum subscription amount has been
achieved. See "The Offering" and "Management." As a result of the anticipated
stock ownership in the Company by the Organizers, together with the influence
which may be exerted by such persons due to their positions as directors of the
Company and the Bank, the Organizers as a group will have substantial control of
the Company and the Bank following the offering. Because purchases by the
Organizers may be substantial, investors should not place any reliance on the
sale of a specified minimum offering amount as an indication of the merits of
this offering or that an Organizer's investment decision is shared by
unaffiliated investors.
The warrants to be granted to the Organizers will be exercisable at a
price of $10.00 per share for a period of ten years after this offering is
terminated. As a result, the Organizers will have the opportunity to profit from
any rise in the market value of the Common Stock or any increase in the net
worth of the Company and can be expected to exercise the warrants, if at all, at
a time when such exercise would result in the dilution of the interests of other
investors purchasing shares in this offering. Furthermore, the exercise of a
substantial number of warrants by the Organizers could adversely impact the
market value of the shares. In addition, the terms on which the Company may be
able to obtain additional capital could be adversely affected, and the holders
of the warrants could possibly exercise the warrants at a time when the Company
could obtain any needed capital by a new offering of securities on terms more
favorable to the Company than those provided for by the warrants.
See "Management -- Stock Warrants."
OFFERING PRICE
Because the Company and the Bank are in organization, the offering
price of $10.00 per share was determined by the Organizers without reference to
traditional criteria for determining stock value such as book value or
historical or projected earnings since such criteria are not applicable to
companies with no history of operations. The price per share was set to enable
the Company to raise gross proceeds of between $5,500,000 and $15,000,000 in
this offering through the sale of a reasonable number of shares, and the price
per share is essentially equivalent to the initial book value per share prior to
the payment of the Company's and the Bank's organizational expenses. No
assurance is or can be given that any of the shares could be resold for the
offering price or any other amount.
8
<PAGE> 10
ABSENCE OF TRADING MARKET
There currently is no market for the shares. The Company has filed a
registration statement with the Securities and Exchange Commission (the "SEC")
to register the issuance of the Common Stock in the offering under the
Securities Act of 1933 (the "Securities Act"), and the Company intends to apply
to list the Common Stock on the Nasdaq Stock Market as soon as it qualifies to
do so. However, the Company does not expect to meet the Nasdaq Stock Market
listing requirements until the Bank has been in operation for at least one year,
and there can be no assurance that the Company will meet the listing
requirements at any time or that any trading market will develop for the shares.
Furthermore, the development of any trading market for the shares may be
adversely affected by purchases of large amounts of shares in this offering by
the Organizers since shares purchased by the Organizers will generally not be
freely tradable. As a result, investors who may need or wish to dispose of all
or part of their shares may be unable to do so except in private, directly
negotiated sales. In addition, sales of substantial amounts of Common Stock
after the offering, by the Organizers or others, could adversely affect
prevailing market prices. See "Description of Capital Stock -- Shares Eligible
for Future Sale."
COMPETITION
The banking business is highly competitive, and the Bank will encounter
strong competition from other savings institutions, as well as from commercial
banks, mortgage banking firms, consumer finance companies, securities brokerage
firms, insurance companies, money market mutual funds, and other financial
institutions operating in the Cobb County area and elsewhere. A number of these
competitors are well established in the Cobb County area. Most of them have
substantially greater resources and lending limits, as well as a lower cost of
funds, than the Bank and may offer certain services, such as extensive and
established branch networks and trust services, that the Bank either does not
expect to provide or will not provide initially. As a result of these
competitive factors, the Bank may have to pay higher rates of interest to
attract deposits. In addition, non-depository institution competitors are
generally not subject to the extensive regulations applicable to the Company and
the Bank. Recent federal legislation permits commercial banks to establish
operations nationwide, further increasing competition from out-of-state
financial institutions. See "Proposed Business -- Competition" and "Supervision
and Regulation." Although the Organizers believe that the Bank will be able to
compete effectively with these institutions, no assurances can be given in this
regard.
SUPERVISION AND REGULATION
The banking industry is heavily regulated. The success of the Company
and the Bank depends not only on competitive factors but also on state and
federal regulations affecting banks, thrifts, and their holding companies. These
regulations are primarily intended to protect depositors, not shareholders.
Regulation of the financial institutions industry is undergoing continued
changes, and the ultimate effect of such changes cannot be predicted. In
December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted, and FDICIA and the regulations thereunder have increased
the regulatory and supervisory requirements for financial institutions, which
has resulted and will continue to result in increased operating expenses.
Legislation that would eliminate the charter for federal savings banks and
savings associations is under discussion. If such legislation is enacted, the
Bank would be required to convert its federal savings bank charter to either a
national bank charter or a state depository institution charter. Additional
statutes affecting financial institutions have been proposed and may be enacted.
Regulations now affecting the Company and the Bank may be modified at any time,
and there is no assurance that such modifications will not adversely affect the
business of the Company and the Bank. See "Supervision and Regulation."
ECONOMIC CONDITIONS
The success of the Company and the Bank will depend, to a certain
extent, upon economic and political conditions, both local and national, as well
as governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply, and other factors beyond
the control of the
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<PAGE> 11
Company and the Bank may adversely affect the Bank's deposit levels and loan
demand and, therefore, the earnings of the Bank and the Company. Although the
Organizers expect favorable economic development in the Bank's market area,
there is no assurance that favorable economic development will occur or that the
Bank's expectation of corresponding growth will be achieved. See "Proposed
Business."
DIVIDEND POLICY
The Company has no plans to pay any cash dividends to its shareholders
in the foreseeable future. Since the Company and the Bank are both start-up
operations and may incur initial losses, both the Company and the Bank intend to
retain any earnings for the period of time management believes necessary to
ensure the success of their operations. The Company will be dependent upon the
Bank for its earnings and funds to pay dividends on the Common Stock. The
payment of dividends by the Company and the Bank is also subject to legal and
regulatory restrictions. Any payment of dividends by the Company in the future
will depend on the Bank's earnings, capital requirements, financial condition,
and other factors considered relevant by the Board of Directors. See "Dividend
Policy," "Proposed Business," and "Supervision and Regulation."
LENDING LIMIT
The Bank is limited in the amount it can loan a single borrower
(including the borrower's related interests) by the amount of the Bank's
capital. These limits will increase and decrease as the Bank's capital increases
and decreases. Unless the Bank is able to sell participations in its loans to
other financial institutions, the Bank will not be able to meet all of the
lending needs of loan customers requiring aggregate extensions of credit above
these limits.
DILUTION
In recognition of their acceptance of the financial risks incurred in
connection with the organization of the Company and the Bank, subject to
obtaining regulatory approval, the Organizers will be granted, for nominal
consideration, warrants to purchase one share of Common Stock for each share
purchased by them in this offering. See "Management -- Stock Warrants." Assuming
that the Organizers purchase the indicated number of shares in this offering,
and assuming all warrants issued in conjunction with shares purchased by the
Organizers are exercised, the Organizers would own, as a group, 35.1% of the
Common Stock to be outstanding upon the completion of this offering and exercise
of the warrants if the minimum number of shares is sold and 14.2% of the Common
Stock if the maximum number of shares is sold and the warrants exercised. After
the offering, the Company expects to adopt a stock option plan which will permit
the Company to grant options to officers, directors, key employees, advisors,
and consultants of the Company. The Company anticipates that it will initially
authorize the issuance of 175,000 shares under the stock option plan. This plan
would include the options the Company will be obligated to issue to Mr. Douglass
under the terms of his letter of employment. Exercise of these options could
have a dilutive effect on the shareholders' interest in the Company's earnings
and book value. In addition, the Company may issue additional stock options or
shares of Common Stock or preferred stock in the future. Any such stock offering
by its nature could be dilutive to the holdings of purchasers in this offering.
ANTITAKEOVER EFFECTS
The Company has certain takeover defenses in place, including (i)
certain provisions relating to meetings of shareholders; (ii) the ability of the
Board of Directors to issue additional shares of common stock and preferred
stock authorized in the Articles of Incorporation without shareholder approval;
(iii) a staggered board of directors; and (iv) a provision in the Company's
bylaws providing that individuals affiliated with business competitors of the
Company may not qualify to serve on the Company's Board of Directors. Any of
these measures may impede the takeover of the Company without the approval of
the Company's Board of Directors. See "Description of Capital Stock - Certain
Antitakeover Effects."
10
<PAGE> 12
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, the Company and the Bank will rely
upon computers for the daily conduct of their business and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Company and the Bank will generally rely on software
and hardware developed by independent third parties to provide the information
systems used by the Company and the Bank. The Company intends to seek assurances
about the Year 2000 compliance with respect to any third party hardware or
software system it intends to use. The Company has contracted with Phoenix
International Ltd., Inc. to use the Phoenix client-server core retail banking
system, and the Company has been advised that Phoenix believes this system is
Year 2000 compliant. The Company also believes that its other internal systems
and software and the network connections it will maintain will be adequately
programmed to address the Year 2000 issue. Based on information currently
available, management does not believe that the Company or the Bank will incur
significant costs in connection with the year 2000 issue. Nevertheless, there
can be no assurances that all hardware and software that either the Company or
the Bank uses will be Year 2000 compliant, and the Company cannot predict with
any certainty the costs the Company or the Bank will incur to respond to any
Year 2000 issues. Further, the business of many of the Bank's customers may be
negatively affected by the Year 2000 issue, and any financial difficulties
incurred by the Bank's customers in solving Year 2000 issues could negatively
affect such customer's ability to repay any loans which the Bank may have
extended. Therefore, even if the Company and the Bank do not incur significant
direct costs in connection with responding to the year 2000 issue, there can be
no assurance that the failure or delay of the Bank's customers or other third
parties in addressing the Year 2000 issue or the costs involved in such process
will not have a material adverse effect on the Bank's business, financial
condition and results of operations.
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 550,000 shares and a
maximum of 1,500,000 shares of its Common Stock at a price of $10.00 per share
to raise gross proceeds of between $5,500,000 and $15,000,000 for the Company.
The minimum purchase for any investor (together with the investor's affiliates)
is 100 shares and the maximum purchase is 5% of the offering unless the Company,
in its sole discretion, accepts a subscription for a lesser or greater number of
shares.
The Organizers (together with members of their immediate families)
intend to purchase an aggregate of at least 115,000 shares of the Common Stock
to be sold in this offering. The Organizers may subscribe for up to 100% of the
shares in the offering if necessary to help the Company achieve the minimum
subscription level necessary to release subscription proceeds from escrow, and
some Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. Any shares purchased by the Organizers in
excess of their original commitment will be purchased for investment and not
with a view to the resale of such shares. See "Description of Capital Stock of
the Company -- Shares Eligible for Future Sale." Because purchases by the
Organizers may be substantial, investors should not place any reliance on the
sale of a specified minimum offering amount as an indication of the merits of
this offering or that an Organizer's investment decision is shared by
unaffiliated investors. See "Management."
Subscriptions to purchase shares will be received until midnight,
Atlanta, Georgia time, on May 15, 1998, unless all of the shares are earlier
sold or the offering is earlier terminated or extended by the Company. See
"Conditions to the Offering and Release of Funds." The Company reserves the
right to terminate the offering at any time or to extend the expiration date for
additional periods not to extend beyond March 31, 1999. The date the offering
terminates is referred to herein as the "Expiration Date." No written notice of
an extension of the offering period need be given prior to any extension and any
such extension will not alter the binding nature of
11
<PAGE> 13
subscriptions already accepted by the Company. Once the Company is subject to
the reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), it will file quarterly reports on Form 10-Q and will make such documents
available to subscribers who request a copy. In addition, the Company intends to
provide quarterly communications to all subscribers which will include
information concerning any extensions of the offering. Extension of the
Expiration Date might cause an increase in the Company's organizational and
pre-opening expenses and in the expenses incurred with this offering. The
Company intends to use a sales agent to sell the shares. See "Plan of
Distribution."
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this offering
are released from escrow (as discussed in greater detail in "Conditions to the
Offering and Release of Funds" below), and the Company reserves the right to
reject, in whole or in part and in its sole discretion, any subscription. The
Company may, in its sole discretion, allocate shares among subscribers in the
event of an oversubscription for the shares. In determining which subscriptions
to accept, in whole or in part, the Company may take into account any factors it
considers relevant, including the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct customers to, the Bank,
and the Company's desire to have a broad distribution of stock ownership. If the
Company rejects any subscription, or accepts a subscription but in its
discretion subsequently elects to cancel all or part of such subscription, the
Company will refund promptly the amount remitted that corresponds to $10.00
multiplied by the number of shares as to which the subscription is rejected or
canceled. Certificates representing shares duly subscribed and paid for will be
issued by the Company promptly after the offering conditions are satisfied and
escrowed funds are delivered to the Company.
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Subscription proceeds accepted by the Company for the initial 550,000
shares subscribed for in this offering will be promptly deposited in an escrow
account with the Escrow Agent until the conditions to this offering have been
satisfied or the offering has been terminated. The offering will be terminated,
no shares will be issued, and no subscription proceeds will be released from
escrow to the Company, unless on or before the Expiration Date (i) the Company
has accepted subscriptions and payment in full for a minimum of 550,000 shares;
and (ii) the Company has obtained approval of the OTS to acquire the capital
stock of the Bank and thereafter to become a unitary thrift holding company. Any
subscription proceeds accepted after satisfaction of the conditions set forth
above but before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital.
If the above conditions are not satisfied by the Expiration Date or the
offering is otherwise earlier terminated, (i) accepted subscription agreements
will be of no further force or effect and subscribers in the offering will not
be shareholders of the Company, (ii) the funds held in the escrow account shall
not be subject to the claims of any creditor of the Company or available to
defray the expenses of this offering, and (iii) the full amount of all
subscription funds will be returned promptly to subscribers, without interest.
The Company will retain any interest earned thereon to repay the expenses
incurred by the Organizers in organizing the Company and the Bank. Any expenses
not paid with such interest will be paid by the Organizers.
The Escrow Agent has not investigated the desirability or advisability
of an investment in the shares by prospective investors and has not approved,
endorsed, or passed upon the merits of an investment in the shares. Subscription
funds held in escrow will be invested in interest-bearing savings accounts,
short-term United States Treasury securities, FDIC-insured bank deposits, or
such other investments as the Escrow Agent and the Company shall agree. The
Organizers do not intend to invest the subscription proceeds held in escrow in
instruments that would mature after the Expiration Date of the offering.
If the above conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers. Once the
Company has met the conditions for the offering, the
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<PAGE> 14
Escrow Agreement will be terminated, and any subscription proceeds accepted
after satisfaction of the conditions before termination of this offering will
not be deposited in escrow but will be available for immediate use by the
Company to fund offering and organizational expenses and for working capital.
When the subscription funds are released to the Company, the Company will use a
portion of the proceeds to repay the Organizers the amounts advanced by them for
organizational and offering expenses.
If the conditions for releasing subscription funds from escrow are met
and such funds are released but final regulatory approval to commence banking
operations is not obtained from the OTS or the Bank does not open for any other
reason, the Board of Directors intends to propose that the shareholders approve
a plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in this offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank, including the
salaries of employees of the Bank and other pre-opening expenses) would be
distributed to the shareholders. In such event, the Company will have incurred
numerous expenses related to the organization of the Company and the Bank, and
the amount distributed to shareholders may be substantially less than the
subscription amount, and in an extreme case shareholders may not be returned any
amount.
PLAN OF DISTRIBUTION
The Company has entered into an Underwriting Agreement with Banc Stock
Financial Services, Inc. (the "Sales Agent"), pursuant to which the Sales Agent
has agreed, subject to the terms of the Underwriting Agreement, to offer and
sell to the public as the Company's agent a minimum of 550,000 shares of Common
Stock on a "best efforts, all or none" basis, and an additional 950,000 shares
of Common Stock on a "best efforts" basis at $10.00 per share. The Sales Agent
is required to use its best efforts through the Expiration Date to sell the
shares. The Sales Agent and the Company have agreed that: (i) with respect to
shares purchased by the Organizers (expected to aggregate 115,000 shares), no
commission will be payable by the Company to the Sales Agent, and (ii) with
respect to shares purchased by certain persons introduced to the Sales Agent by
the Company (up to 250,000 shares), the commission will be 5.5% of the aggregate
price of such shares. The Sales Agent's commission will be 6.5% on all other
shares it sells in the offering. The Sales Agent may select other dealers who
are members of the National Association of Securities Dealers, Inc. to sell
shares and who will receive a selling commission not to exceed 6.5% of the gross
offering proceeds. The Company will also pay the Sales Agent's expenses in the
offering, up to a maximum of $65,000.
The Company has the right to terminate the Underwriting Agreement under
certain circumstances. In such event, offers and sales may be made on behalf of
the Company by certain of its officers and directors, or the Company may engage
one or more other broker/dealers to make sales on its behalf. The Company does
not currently have any other arrangements in place. As described above, until
the minimum number of shares has been sold, all funds received by the Sales
Agent or the Company in connection with the sale of shares will be promptly
transmitted to the Escrow Agent.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Sales Agent against certain liabilities in
connection with this offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted pursuant to the Underwriting Agreement, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed by the Securities Act and
is, therefore, unenforceable.
Prior to the date of the Prospectus, there has been no public market
for the shares. The initial offering price of the shares offered hereby has been
established by the Company based upon its assessment of the capital needs of the
Company and the commercial potential of the services to be offered by the
Company. The Company has had discussions with the Sales Agent regarding the
establishment and maintenance of a market for the shares after the offering.
Based upon such discussions, the Company expects that a secondary market may
eventually
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<PAGE> 15
develop for the shares, although the Company can make no assurances in this
regard. In general, if a secondary market develops, the shares will be freely
transferable and assignable by the holder thereof(except shares held by
affiliates), and nonaffiliate shareholders may sell any number of shares in such
secondary market. See "Description of the Capital Stock of the Company - Shares
Available for Future Sale." In addition, factors such as the degree to which the
secondary market is active will determine the willingness of the market makers,
once a secondary market is established, to continue to maintain the secondary
market. The Company and its officers and directors have agreed with the Sales
Agent not to sell any shares for a period of six months after the date of this
Prospectus without the prior written consent of the Sales Agent. It is
anticipated that affiliates of the Sales Agent will purchase ___________ shares
at the public offering price for their own accounts.
HOW TO SUBSCRIBE
Shares may be subscribed for by delivering the subscription agreement
(the "Subscription Agreement") attached hereto as Exhibit A, completed and
executed, to the Sales agent, on or prior to the Expiration Date. Subscribers
should retain a copy of the completed Subscription Agreement for their records.
The subscription price is due and payable when the Subscription Agreement is
delivered. Payment must be made in United States dollars by cash or by check,
bank draft or money order drawn to the order of The Bankers Bank, Escrow Account
for Southeast Commerce Holding Company in the amount of $10.00 multiplied by the
number of shares subscribed for.
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The Offering -
Conditions to the Offering and Release of Funds," all subscription funds held in
escrow will be released and will become capital of the Company. The gross
proceeds to the Company from the sale of the shares offered hereby will be
between $5,500,000 and $15,000,000. The Company will use a portion of the
offering proceeds to pay any sales agent commissions and to pay (or reimburse
the organizers for) the organizational and offering expenses of the Company and
the organizational and pre-opening expenses of the Bank (which are described in
the following section) through the date of the release of funds held in escrow.
The organizational and offering expenses of the Company will consist primarily
of legal, accounting, marketing, and printing expenses, and the Company
anticipates that they will not exceed $150,000. The Company has established a
$500,000 line of credit (the "Note") with The Bankers Bank. The proceeds of the
Note will be used to defray pre-opening and organizational expenses. The Note is
due on August 27, 1998 and bears interest at adjustable prime rate, which was
8.5% as of December 31, 1997. As of December 31, 1997, the Company had drawn
$170,000 against the line of credit. The money is being used for pre-opening
expenses and organizational and offering costs. Upon the successful completion
of the offering, the Company will use the proceeds to retire the debt.
After payment of these expenses, the Company will use 75% of the net
proceeds of the offering (subject to a minimum of $5,000,000) to purchase all of
the capital stock of the Bank. The Company will retain the balance of the
proceeds and intends initially to invest them in United States government
securities or as a deposit with the Bank. The Company intends eventually to use
these sums to develop a multi-site financial services institution that focuses
its core business on community banking as it relates to real estate and other
related areas of commerce. These businesses may include a residential real
mortgage company, a wholesale mortgage company, a small loan finance company,
and a property/casualty insurance company. The Company may also use such
proceeds for potential expansion opportunities, such as the establishment of
additional branches or, the acquisition of other financial institutions. The
Company does not currently have any definitive plans regarding any such
expansion possibilities.
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<PAGE> 16
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the minimum number and maximum number of shares in
this offering.
<TABLE>
<CAPTION>
Minimum Maximum
Offering (1) Offering (2)
------------ ------------
<S> <C> <C>
Gross proceeds from offering $ 5,500,000 $ 15,000,000
Sales Agents commission(3) (282,750) (900,250)
Expenses issuance and distribution of Common Stock (150,000) (150,000)
Investment in capital stock of the Bank (5,000,000) (10,500,000)
----------- ------------
Remaining proceeds $ 67,250 $ 3,449,750)
=========== ============
</TABLE>
(1) Assumes that 550,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,500,000 shares of Common Stock are sold in this offering.
(3) The Sales Agent's commission will be 5.5% with respect to shares sold in
the offering to certain investors identified by the Organizers (up to
250,000 shares) and 6.5% with respect to other shares sold in the
offering, except that the Sales Agent will not receive any commission on
shares to be purchased in the offering by the Organizers. The Organizers
currently contemplate purchasing at least 115,000 shares in the offering.
The commissions described in this table reflect the payment of a 6.5%
commission on all sales other than the 115,000 shares expected to be
purchased by the Organizers.
BY THE BANK
The Bank currently plans to use up to approximately $500,000 of the
proceeds it receives from the sale of its stock to the Company to reimburse the
Company and the Organizers for amounts advanced by the Company and the
Organizers to pay organizational and pre-opening expenses of the Bank.
Organizational expenses of the Bank, estimated at $100,000, include consulting
fees, expenses for market analysis and feasibility studies, and legal fees and
expenses. Pre-opening expenses, estimated at $150,000, include officers' and
employees' salaries and benefits (assuming the Bank opens for business on its
target date of June 1, 1998). In addition, the Company anticipates that
approximately $100,000 will be used for renovation of the Bank's offices. For
furniture, fixtures, and equipment (including computer equipment) for the
offices, the Bank expects to spend approximately $150,000 in 1998. The balance
of the proceeds to be received by the Bank and available for use in the first
year (estimated at $4,500,000 if the minimum number of shares is sold and
$10,000,000 if the maximum number is sold) will be used for loans to customers,
investments, and other general corporate purposes.
The following table depicts the anticipated use of proceeds by the
Bank. All proceeds received by the Bank will be in the form of an investment by
the Company in the Bank's capital stock.
<TABLE>
<CAPTION>
Minimum Maximum
Offering(1) Offering(2)
----------- -----------
<S> <C> <C>
Investment by the Company in the Bank's capital stock ...... $ 5,000,000 $ 10,500,000
Reimbursement to the Company and Organizers for amounts
advanced to the Bank for organizational and
pre-opening expenses of the Bank ......................... (250,000) (250,000)
Furniture, Fixtures and Equipment .......................... (150,000) (150,000)
Renovation of Bank Offices ................................. (100,000) (100,000)
------------ ------------
Remaining Proceeds ......................................... $ 4,500,000 $ 10,000,000
============ ============
</TABLE>
- -----------------------------------
(1) Assumes that 550,000 shares of Common Stock are sold in this offering.
(2) Assumes that 1,500,000 shares of Common Stock are sold in this offering.
Although the amounts set forth above provide an indication of the
proposed use of funds based on the Organizers' plans and estimates, actual
expenses may vary from the estimates. These estimates were based on
15
<PAGE> 17
assumptions that the Organizers believed were reasonable, but as to which no
assurances can be given. The Organizers believe that the estimated minimum net
proceeds of the offering will satisfy the cash requirements of the Company and
the Bank for their respective first three years of operations and that neither
the Company nor the Bank will need to raise additional funds for operations
during this period, but there can be no assurance that this will be the case.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997, and the pro forma consolidated capitalization of the Company
and the Bank, as adjusted to give effect to the sale of the minimum of 550,000
shares and a maximum of 1,500,000 shares in this offering. The Bank has
established June 1, 1998 as the target date for opening the Bank; accordingly,
the "As Adjusted" column reflects estimated pre-opening expenses of the Company
and the Bank through June 1, 1998.
<TABLE>
<CAPTION>
As Adjusted As Adjusted
for for
December Minimum Maximum
31, 1997 Offering Offering
-------- -------- --------
<S> <C> <C> <C>
Common Stock, par value $.01 per
share; 10,000,000 shares
authorized; ten shares issued
and outstanding(1); 550,000
shares issued and outstanding as
adjusted (minimum offering);
1,500,000 shares issued and
outstanding (maximum offering) $ 0 $ 5,500 $ 15,000
Preferred Stock, par value $.01
per share; 10,000,000 shares
authorized; no shares issued and
outstanding 0 0 0
Additional paid-in capital(2) 100 5,061,750 13,934,750
Deficit accumulated during the
pre-opening stage(3) (74,760) (150,000) (150,000)
-------- ---------- -----------
Total shareholders' equity (deficit)(4) $(74,660) $4,917,250 $13,799,750
======== ========== ===========
</TABLE>
- ---------------------------------------
(1) Richard A. Parlontieri was issued ten shares upon organization of the
Company which will be redeemed for $10.00 per share (the price at which
they were issued) upon the first issuance of shares offered hereby. The
stated capital for ten shares is $.10.
(2) The expenses of the offering will be charged against this account.
These expenses are estimated to be approximately $432,750 in the
minimum offering and $1,050,250 in the maximum offering and these
amounts have been used in the calculation of the amounts shown in the
"As Adjusted" columns. The commissions described in this table reflect
the payment of a 6.5% commission on all sales other than the 115,000
shares expected to be purchased by the Organizers.
(3) The deficit results from the expensing of estimated pre-opening
expenses. As of December 31, 1997, approximately $74,760 of pre-opening
expenses and $84,926 of capitalizable organizational and offering costs
had been incurred on behalf of the Company and the Bank, and the
Company's total accumulated shareholder's deficit was $74,660. The
Organizers estimate that a total of $150,000 of pre-opening expenses,
$175,000 of organizational costs ($100,000 for the Bank and $75,000 for
the Company), and up to $150,000 of capitalizable property costs for
the purchase of furniture, fixtures, and equipment are expected to be
incurred by the Company and the Bank prior to the commencement of
operations (assumed to occur in June 1998). However, no assurances can
be given that the Bank will open by this date or at all, and the amount
of pre-opening expenses and organizational costs could ultimately be
16
<PAGE> 18
greater than currently estimated. Furniture, fixtures, and equipment
will be capitalized and amortized over the life of the lease or over
the estimated useful life of the asset. The Company will retain any
interest earned on subscription payments held in escrow prior to
conclusion of the offering. Such interest will be used to help offset
the deficit accumulated during the pre-opening stage, but the figures
shown above do not include any estimate of the interest which may be
earned.
(4) The shareholders are likely to experience additional dilution due to
operating losses expected to be incurred during the initial years of
the Bank's operations.
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of
retaining any earnings to provide funds to operate and expand the business.
Consequently, it is unlikely that any cash dividends will be paid in the near
future. The Company's ability to pay any cash dividends to its shareholders in
the future will depend primarily on the Bank's ability to pay dividends to the
Company. In order to pay dividends to the Company, the Bank must comply with the
requirements of all applicable laws and regulations. See "Supervision and
Regulation The Bank - Dividends" and "Supervision and Regulation - The Bank -
Capital Requirements." In addition to the availability of funds from the Bank,
the future dividend policy of the Company is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
PLAN OF OPERATION
Southeast Commerce Holding Company was formed to organize and own all
of the capital stock of Commerce Bank. The Organizers filed an application with
the OTS in October 1997 to charter the Bank as a federal savings bank. The
issuance of a charter will depend, among other things, upon compliance with
certain legal requirements that may be imposed by the OTS, including
capitalization of the Bank with at least a specified minimum amount of capital,
which the Organizers believe will be $5,000,000. Additionally, the Company must
obtain the approval of the OTS to become a unitary thrift holding company before
acquiring the capital stock of the Bank. The Bank has also filed an application
with the FDIC for deposit insurance, and the Company has filed an application
with the Georgia Department of Banking and Finance for authorization to become a
holding company of the Bank. The Organizers expect to receive all regulatory
approvals by April 1998.
As of December 31, 1997, the Company had total assets of $160,501, consisting
primarily of deferred organization costs ($84,926) and fixed assets ($50,000).
The Company incurred a net loss of $74,760 for the period from inception (August
22, 1997) to December 31, 1997. The Company has arranged a $500,000 line of
credit with The Bankers Bank at adjustable prime rate, which was 8.5% as of
December 31, 1997. The line of credit is unsecured and requires interest only
payments on a quarterly basis with total principal plus interest due at maturity
on August 27, 1998. The line of credit is guaranteed by the Organizers. This
line of credit has been used to repay (without interest) the organizers' initial
funding of the Company and to provide additional operating funds until permanent
funding is obtained. As of December 31, 1997, approximately $170,000 had been
drawn against this line of credit. Management believes that the current level of
expenditures is within the financial capabilities of the Organizers and is
adequate to meet existing obligations and fund current operations. On December
30, 1997, the Company entered into a software license agreement for the data
processing applications and implementation of the Company's electronic data
processing system. The agreement provides for a total of $313,500 plus related
expenses and is to be fully paid in 1998. As of December 31, 1997, the Company
had made a deposit of $50,000 under this agreement.
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Upon the completion of the sale of common stock and opening of the
Bank, incurred organization costs, estimated to be $175,000 (consisting
principally of legal, regulatory, consulting and incorporation fees), will be
deferred and amortized over the Company's initial 60 months of operations.
Offering expenses, estimated to be $75,000 (consisting principally of direct
incremental costs of the stock offering), will be deducted from the proceeds of
the offering, and pre-opening expenses, estimated to be $150,000 (consisting
principally of salaries, overhead and other operating costs), will be charged
against the initial period's operating results.
The Bank's initial office will be located at Paces Summit, located in historic
Vinings, Georgia, at 100 Galleria Parkway, Suite 400, Atlanta, Georgia 30339. On
October 14, 1997, the Company entered into a ten-year lease agreement for 5,000
square feet of office space at its planned main office location. The Company
intends to commence leasehold improvements in April 1998 and anticipates that
the office space will be ready for the Bank to open by June 1, 1998.
The Company intends initially to engage only in the business of owning and
managing the Bank, and the Bank will focus its core business on first and second
residential mortgages, home equity loans, refinancing, consumer loans,
commercial loans, private banking and SBA lending. Through the thrift charter,
the Bank will be able to operate in all fifty states and to branch into any
county in the state of Georgia. The thrift charter will also give the Company
more flexibility to pursue strategic opportunities to grow its customer base and
to create cross-selling opportunities to those same customers. The Company
intends eventually to build a multi-site financial services institution that
focuses its core business on community banking as it relates to real estate and
other related areas of commerce. These businesses may include, but will not be
limited to, a residential mortgage company, a wholesale mortgage company, a
small loan finance company, and a property/ casualty insurance company.
Like many financial institutions, the Company and the Bank will rely
upon computers for the daily conduct of their business and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Company and the Bank will generally rely on software
and hardware developed by independent third parties to provide the information
systems used by the Company and the Bank. The Company intends to seek assurances
about the Year 2000 compliance with respect to any third party hardware or
software system it intends to use. The Company has contracted with Phoenix
International Ltd., Inc. to use the Phoenix client-server core retail banking
system, and the Company has been advised that Phoenix believes this system is
Year 2000 compliant. The Company also believes that its other internal systems
and software and the network connections it will maintain will be adequately
programmed to address the Year 2000 issue. Based on information currently
available, management does not believe that either the Company or the Bank will
incur significant costs in connection with the year 2000 issue. Nevertheless,
there can be no assurances that all hardware and software that the Company or
the Bank uses will be Year 2000 compliant, and the Company cannot predict with
any certainty the costs the Company and the Bank will incur to respond to any
Year 2000 issues.
The Company intends to use state-of-the-art technology to offer
electronic banking services and products and provide better service to its
customers. The Bank's operating strategies will be based on its philosophy of
Better People, Better Service, Better Banking(sm).
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PROPOSED BUSINESS
GENERAL
The Company was incorporated as a Georgia corporation on August 22,
1997, primarily to own and control all of the capital stock of the Bank. The
Company initially will engage in no business other than owning and managing the
Bank. As a federally chartered savings association, the Bank will have general
authority to originate and purchase loans secured by real estate, secured or
unsecured loans for commercial, corporate, business, or agricultural purposes,
and loans for personal, family, or household purposes. The Bank will initially
emphasize retail banking, home mortgages, real estate development, and consumer
lending needs. The Bank will not be permitted to make non-real estate commercial
purpose loans that exceed 20% of its assets or non-real estate consumer purpose
loans that exceed 35% of its assets. While not restricted by law, the Bank
expects initially to limit its lending activities primarily to Cobb County,
Georgia, and the surrounding areas.
The Organizers have chosen a holding company structure under which the
Company will acquire all of the capital stock of the Bank because, in the
judgment of the Organizers, the holding company structure provides flexibility
that would not otherwise be available. The Company will initially engage only in
the business of owning and managing the Bank, and the Bank will focus its core
business on first and second residential mortgages, home equity loans,
refinancing, consumer loans, commercial loans, private banking and SBA lending.
The thrift charter will allow the Bank to operate in all fifty states
and to branch into any county in the state of Georgia without any additional
regulatory approval. The thrift charter will also give the Company more
flexibility to pursue strategic opportunities to grow its customer base and to
create cross-selling opportunities to those same customers. The Company intends
eventually to build a multi-site financial services institution that focuses its
core business on community banking as it relates to real estate and other
related areas of commerce. These businesses may include, but will not be limited
to, a residential mortgage company, a wholesale mortgage company, a small loan
finance company, and a property/ casualty insurance company.
The Company intends to use a state-of-the-art technology, fully
integrated, client-server core retail banking system which the Bank believes
will permit it to offer better service to its customers. The Company has entered
into an agreement with Phoenix International Ltd., Inc. to license the Phoenix
Retail Banking System (the "Phoenix System"). The Organizers believe that the
Phoenix System, through its client/server technology, addresses many of the
deficiencies of the mainframe- and minicomputer-based legacy systems on which
most banks currently operate because it will allow the Bank to integrate data
into a comprehensive management information network. The Organizers believe that
the Phoenix System will support the core areas of bank data processing,
including system administration, account processing, nightly processing, teller
functions, holding company accounting, and budgeting. Because the Phoenix System
is a fully integrated system, the Organizers believe that it will provide
significant advantages to the Bank in three critical areas: (i) customer
relationship management; (ii) management decision support; and (iii) bank
product creation and support. The Organizers believe that it is unusual for
smaller financial institutions, such as community banks, to have client/server
technology such as the Phoenix System because the cost for an existing financial
institution to convert from its existing computer platform to such a
client/server technology would be too great for many smaller financial
institutions to justify. The Bank's operating strategies will be based on its
philosophy of Better People, Better Service, Better Banking(sm).
MARKETING FOCUS
Most of the banks in the Cobb County area are now local branches of
large regional banks. Although size gives the larger banks certain advantages in
competing for business from large corporations, including higher lending limits
and the ability to offer services in other areas of Georgia and the Cobb County
area, the Organizers believe that there is a void in the community banking
market in the Cobb County area and believe that the Bank can successfully fill
this void. As a result, the Company generally will not attempt to compete for
the banking
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relationships of large corporations, but will concentrate its efforts on small-
to medium-sized businesses and on individuals.
The Bank plans to advertise to emphasize the Company's local ownership,
community bank nature, and ability to provide more personalized service than its
competition. The Organizers, as long-time residents and business people in the
Cobb County area, have determined the credit needs of the area through personal
experience and communications with their business colleagues. The Organizers
believe that the proposed community bank focus of the Bank is likely to succeed
in this market. The Organizers believe that the area will react favorably to the
Bank's emphasis on service to small businesses, individuals, and professional
concerns. However, no assurances in this respect can be given.
LOCATION AND SERVICE AREA
While not restricted by law, the Bank expects initially to draw 75% of
its business from Cobb County, Georgia, and the surrounding areas. Cobb County,
which will be the Bank's primary service area, has been one of the fastest
growing regions in Georgia over the last several years. The county's population
has grown from 447,745 in 1990 to 538,832 in 1996, and per capita income in the
county was $30,000 as of 1996 making it the second largest county in the state.
The Company's address is 100 Galleria Parkway, Suite 400, Atlanta,
Georgia 30339. The Company's telephone number is (770) 956-4034. See
"Facilities."
DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, commercial accounts, savings accounts, and other time
deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposit. The transaction accounts and time
certificates will be tailored to the Bank's principal market area at rates
competitive to those offered in the Cobb County area. In addition, the Bank
intends to offer certain retirement account services, such as Individual
Retirement Accounts (IRAs). The Bank intends to solicit these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to individuals and small-
to medium-sized businesses and professional concerns that are located in or
conduct a substantial portion of their business in the Bank's market area. The
Bank will initially emphasize retail banking, home mortgages, real estate
development, and consumer lending needs. The Bank will not be permitted to make
non-real estate commercial purpose loans that exceed 20% of its assets or
non-real estate consumer purpose loans that exceed 35% of its assets. Outside of
the inherent risk of the credit worthiness of the Bank's borrowers, other risks
associated with residential mortgage loans would be the inability to move
foreclosed real estate in a down market or economy, shifts in the demographics
of a given market from residential zonings to commercial, individual customers
who have been displaced due to corporate downsizing/loss of income, and an
overall economic downturn creating unemployment due to lack of product demand.
Real Estate Loans. The Organizers expect that one of the primary
components of the Bank's loan portfolio will be loans secured by first or second
mortgages on real estate. These loans will generally consist of commercial real
estate loans, construction and development loans, and residential real estate
loans (but will exclude home equity loans, which are classified as consumer
loans). Loan terms generally will be limited to five years or less, although
payments may be structured on a longer amortization basis. Interest rates may be
fixed or adjustable, and will more likely be fixed in the case of shorter term
loans. The Bank will generally charge an origination fee. Management will
attempt to reduce credit risk in the commercial real estate portfolio by
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emphasizing loans on owner-occupied office and retail buildings where the
loan-to-value ratio, established by independent appraisals, does not exceed 80%.
In addition, the Bank will typically require personal guarantees of the
principal owners of the property backed with a review by the Bank of the
personal financial statements of the principal owners. The principal economic
risk associated with each category of anticipated loans, including real estate
loans, is the creditworthiness of the Bank's borrowers. The risks associated
with real estate loans vary with many economic factors, including employment
levels and fluctuations in the value of real estate. The Bank will compete for
real estate loans with a number of bank competitors which are well established
in the Cobb County area. Most of these competitors have substantially greater
resources and lending limits than the Bank. As a result, the Bank may have to
charge lower interest rates to attract borrowers. See "Competition" below. The
Bank may also originate loans for sale into the secondary market. The Bank
intends to limit interest rate risk and credit risk on these loans by locking
the interest rate for each loan with the secondary investor and receiving the
investor's underwriting approval prior to originating the loan.
Commercial Loans. The Bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. Working capital loans will typically have terms not
exceeding one year and will usually be secured by accounts receivable,
inventory, or personal guarantees of the principals of the business. For loans
secured by accounts receivable or inventory, principal will typically be repaid
as the assets securing the loan are converted into cash, and in other cases
principal will typically be due at maturity. The principal economic risk
associated with each category of anticipated loans, including commercial loans,
is the creditworthiness of the Bank's borrowers. The risks associated with
commercial loans vary with many economic factors, including the economy in the
Cobb County area. The well-established banks in the Cobb County area will make
proportionately more loans to medium- to large-sized businesses than the Bank.
Many of the Bank's anticipated commercial loans will likely be made to small- to
medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Consumer Loans. The Bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit, and revolving lines of
credit such as credit cards. These loans typically will carry balances of less
than $25,000 and, in the case of non-revolving loans, will be amortized over a
period not exceeding 48 months or will be ninety-day term loans, in each case
bearing interest at a fixed rate. The revolving loans will typically bear
interest at a fixed rate and require monthly payments of interest and a portion
of the principal balance. The underwriting criteria for home equity loans and
lines of credit will generally be the same as applied by the Bank when making a
first mortgage loan, as described above, and home equity lines of credit will
typically expire ten years or less after origination. As with the other
categories of loans, the principal economic risk associated with consumer loans
is the creditworthiness of the Bank's borrowers, and the principal competitors
for consumer loans will be the established banks in the Cobb County area.
Loan Approval and Review. The Bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with a
higher lending limit or the officers' loan committee. The Bank will establish an
officers' loan committee that has lending limits, and any loan in excess of this
lending limit will be approved by the directors' loan committee. The Bank will
not make any loans to any director, officer, or employee of the Bank unless the
loan is approved by the board of directors of the Bank and is made on terms not
more favorable to such person than would be available to a person not affiliated
with the Bank.
Lending Limits. The Bank's lending activities will be subject to a
variety of lending limits imposed by federal law. While differing limits apply
in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank will be
subject to a loan-to-one-borrower limit. Since the enactment of FIRREA in 1989,
a savings association generally may not make loans to
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one borrower and related entities in an amount which exceeds 15% of its
unimpaired capital and surplus, although loans in an amount equal to an
additional 10% of unimpaired capital and surplus may be made to a borrower if
the loans are fully secured by readily marketable securities. Unless the Bank is
able to sell participations in its loans to other financial institutions, the
Bank will not be able to meet all of the lending needs of loan customers
requiring aggregate extensions of credit above these limits. It is not currently
anticipated that the Bank will have an initial loan loss reserve when it
commences operations.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks, and automatic drafts for various accounts. The Bank plans to become
associated with a shared network of automated teller machines that may be used
by Bank customers throughout Georgia and other regions. The Organizers believe
that by being associated with a shared network of ATMs, the Bank will be better
able to serve its customers and will be able to attract customers who are
accustomed to the convenience of using ATMs, although the Organizers do not
believe that maintaining this association will be critical to the Bank's
success. The Bank intends to begin offering these services shortly after the
Bank's opening. The Bank also plans to offer MasterCard and VISA credit card
services through a correspondent bank as an agent for the Bank. The Bank does
not plan to exercise trust powers during its initial years of operation.
COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the Cobb
County area and elsewhere. In 1996, there were more than 160 branches of
financial institutions operating in Cobb County, holding over $4.5 billion in
deposits. A number of these competitors are well established in the Cobb County
area. Most of them have substantially greater resources and lending limits than
the Bank and offer certain services, such as extensive and established branch
networks and trust services, that the Bank either does not expect to provide or
will not provide initially. As a result of these competitive factors, the Bank
may have to pay higher rates of interest to attract deposits.
FACILITIES
The Bank's initial office will be located in Paces Summit in historic
Vinings. The Bank's address is 100 Galleria Parkway, Suite 400, Atlanta, Georgia
30339. The Bank will be located on the first floor of the Paces Summit office
complex and will operate a 5,000 square foot facility. The Company has budgeted
$200,000 for leasehold improvements to make the leased space usable for banking
operations. The Company intends to commence leasehold improvements in April 1998
and anticipates that the office space will be ready for the Bank to open by June
1, 1998.
The Company believes that the facilities will adequately serve the
Bank's needs for its first several years of operation.
EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank
will have approximately 12 full-time employees. The Company will not have any
employees other than its officers.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the
Bank or any of their properties are subject.
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SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking
laws and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and following with FDICIA, which
was enacted in 1991, numerous additional regulatory requirements have been
placed on the banking industry in the past several years, and additional changes
have been proposed. The banking industry is also likely to change significantly
as a result of the passage of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act") The operations of the
Company and the Bank may be affected by legislative changes and the policies of
various regulatory authorities. The Company is unable to predict the nature or
the extent of the effect on its business and earnings that fiscal or monetary
policies, economic control, or new federal or state legislation may have in the
future.
THE COMPANY
The Company will be a registered holding company under both the Savings
and Loan Holding Company Act (the "SLHCA") set forth in Section 10 of the Home
Owners Loan Act ("HOLA") and the Financial Institutions Code of Georgia. The
Company will be regulated under such acts by the OTS and by the Department of
Banking and Finance (the "DBF"), respectively. As a savings and loan holding
company, the Company will be required to file with the OTS an annual report and
such additional information as the OTS may require pursuant to the SLHCA. The
OTS will also conduct examinations of the Company and each of its subsidiaries.
As a unitary savings and loan holding company owning only one savings
institution, the Company will generally be allowed to engage and invest in a
broad range of business activities not permitted to commercial bank holding
companies or multiple savings and loans holding companies, provided that the
Bank continues to qualify as a "qualified thrift lender." See "--the Bank -
Qualified Thrift Lender Requirements."
The SLHCA and the Financial Institutions Code of Georgia will prohibit
the Company from acquiring control of another savings association or another
savings and loan holding company without prior approval from the OTS and the
DBF, respectively. However, savings and loan holding companies are allowed to
acquire or to retain as much as 5% of the voting shares of a savings institution
or savings and loan holding company without regulatory approval.
The OTS may not approve an acquisition that would result in the
formation of certain types of interstate holding company networks. The OTS is
precluded from approving an acquisition that would result in the formation of a
multiple holding company controlling institutions in more than one state unless
the acquiring company or one of its savings institution subsidiaries is
authorized to acquire control of an institution or to operate an office in the
additional state pursuant to a supervisory acquisition authorized under Section
13(k) of the Federal Deposit Insurance Act or unless the statutes of the state
in which the institution to be acquired is located permits such an acquisition.
THE BANK
General. Subject to receipt of the necessary approvals of its pending
applications, the Bank will operate as a federal savings bank incorporated under
the laws of the United States and subject to examination by the OTS. The OTS
will regulate or monitor virtually all areas of the Bank's operations, including
security devices and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers,
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issuances of securities, payment of dividends, interest rates payable on
deposits, interest rates or fees chargeable on loans, establishment of branches,
corporate reorganizations, maintenance of books and records, and adequacy of
staff training to carry on safe lending and deposit gathering practices. The OTS
will require the Bank to maintain certain capital ratios and will impose
limitations on the Bank's aggregate investment in real estate, bank premises,
and furniture and fixtures. The Bank will be required by the OTS to prepare
quarterly reports on the Bank's financial condition and to conduct an annual
audit of its financial affairs in compliance with minimum standards and
procedures prescribed by the OTS. OTS Regulations generally provide that federal
savings banks must be examined no less frequently than every 18 months. The Bank
also is subject to assessments by the OTS to cover the costs of such
examinations.
As a federally chartered savings institution, the Bank generally will
not be subject to those provisions of Georgia law governing state chartered
financial institutions or to the jurisdiction of the DBF. However, the DBF
interprets the Financial Institutions Code of Georgia to require the prior
approval of the DBF for any acquisition of control of any savings institution
(whether chartered by state or federal authority) located in Georgia.
The DBF also interprets the Financial Institutions Code of Georgia to
include savings and loan holding companies as "bank holding companies," thus
giving the DBF the authority to make examinations of the Company and any
subsidiaries and to require periodic and other reports. Existing DBF regulations
do not restrict the business activities or investments of the Company or the
Bank.
State usury laws are applicable to federally insured institutions with
regard to loans made within Georgia. Generally speaking, Georgia law does not
establish ceilings on interest rates although certain specialized types of
lending, in which the Bank engages, such as making loans of $3,000 or less, are
subject to interest rate limitations.
Subsidiary institutions of a savings and loan holding company, such as
the Bank, are subject to certain restrictions imposed by the Federal Reserve Act
on any extension of credit to the holding company or any of its subsidiaries, on
investment in the stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower. In addition, a
holding company and its subsidiaries are prohibited from engaging in certain
tying arrangements in connection with any extension of credit or provision of
any property or services.
Capital Requirements. OTS regulations require that federal savings
banks maintain (i) "tangible capital" in an amount of not less than 1.5% of
total assets, (ii) "core capital" in an amount not less than 3.0% of total
assets, and (iii) a level of risk-based capital equal to 8% of risk-weighted
assets. Under OTS regulations, the term "core capital" generally includes common
stockholders' equity, noncumulative perpetual preferred stock and related
surplus, and minority interests in the equity accounts of consolidated
subsidiaries less unidentifiable intangible assets (other than certain amounts
of supervisory goodwill) and certain investments in certain subsidiaries plus
90% of the fair market value of readily marketable purchased mortgage servicing
rights and purchased credit card relationships (subject to certain conditions).
"Tangible capital" generally is defined as core capital minus intangible assets
and investments in certain subsidiaries, except purchased mortgage servicing
rights.
In determining total risk-weighted assets for purposes of the
risk-based requirement, (i) each off-balance sheet asset must be converted to
its on-balance sheet credit equivalent amount by multiplying the face amount of
each such item by a credit conversion factor ranging from 0% to 100% (depending
upon the nature of the asset), (ii) the credit equivalent amount of each
off-balance sheet asset and each on-balance sheet asset must be multiplied by a
risk factor ranging from 0% to 200% (again depending upon the nature of the
asset) and (iii) the resulting amounts are added together and constitute total
risk-weighted assets. "Total capital"-risk-based capital requirement equals the
sum of core capital plus supplementary capital (which, as defined, includes the
sum of, among other items, perpetual preferred stock not counted as core
capital, limited life preferred stock, subordinated debt, and general loan and
lease loss allowances up to 1.25% of risk-weighted assets) less certain
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deductions. The amount of supplementary capital that may be counted towards
satisfaction of the total capital requirement may not exceed 100% of core
capital, and OTS regulations require the maintenance of a minimum ratio of core
capital to total risk-weighted assets of 4%.
OTS regulations also include an interest-rate risk component in the
risk-based capital requirement. Under this regulation, an institution is
considered to have excess interest rate-risk if, based upon a 200-basis point
change in market interest rates, the market value of an institution's capital
changes by more than 2%. The OTS risk-based capital standards also provide for
concentration of credit risk, risk from nontraditional activities and actual
performance, and expected risk of loss on multi-family mortgages.
Capital requirements higher than the generally applicable minimum
requirement may be established for a particular savings association if the OTS
determines that the institution's capital was or may become inadequate in view
of its particular circumstances.
Additionally, the DBF requires that savings and loan holding companies,
such as the Company, must maintain a 5% Tier 1 leverage ratio on a consolidated
basis.
Deposit Insurance. Deposits at the Bank are insured to a maximum of
$100,000 for each insured depositor by the FDIC. The FDIC establishes rates for
the payment of premiums by federally insured commercial banks and savings banks,
or thrifts, for deposit insurance. A separate Bank Insurance Fund ("BIF") and
Savings Association Insurance Fund ("SAIF") are maintained for commercial banks
and thrifts, respectively, with insurance premiums from the industry used to
offset losses from insurance payouts when banks and thrifts fail. Since 1993,
insured depository institutions like the Bank have paid for deposit insurance
under a risk-based premium system. Under this system, until mid-1995 depositor
institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semi-annual basis. Once the BIF reached its
legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated this minimum assessment. It also separated
the Financial Corporation (FICO) assessment to service the interest on its bond
obligations. The amount assessed on individual institutions, including the Bank,
by FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in deposit insurance premiums
or changes in risk classification will increase the Bank's cost of funds, and
there can be no assurance that such cost can be passed on the Bank's customers.
As an insurer, the FDIC issues regulations, conducts examinations and
generally supervises the operations of its insured institutions. Any insured
institution which does not operate in accordance with or conform to FDIC
regulations, policies and directives may be sanctioned for non-compliance. The
FDIC has the authority to suspend or terminate insurance of deposits upon the
finding that the institution has engaged in unsafe or unsound practices, is
operating in an unsafe or unsound condition, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC. If insurance of
accounts is terminated by the FDIC, the deposits in the institution will
continue to be insured by the FDIC for a period of two years following the date
of termination. The FDIC requires an annual audit by independent accountants and
also periodically makes its own examinations of insured institutions.
In addition to deposit insurance premiums, savings institutions also
must bear a portion of the administrative costs of the OTS through an assessment
based on the level of total assets of each insured institution and which
differentiates between troubled and nontroubled savings institutions.
Additionally, the OTS assesses fees for the processing of various applications.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the
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securities or obligations of affiliates. The aggregate of all covered
transactions is limited in amount, as to any one affiliate, to 10% of the bank's
capital and surplus and, as to all affiliates combined, to 20% of the bank's
capital and surplus. Furthermore, within the foregoing limitations as to amount,
each covered transaction must meet specified collateral requirements. Compliance
is also required with certain provisions designed to avoid the taking of low
quality assets.
The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Dividends. The Bank is subject to regulatory restrictions on the
payment of dividends, including a prohibition of payment of dividends from its
capital. All dividends must be paid out of the undivided profits then on hand,
after deducting expenses, including losses and bad debts. The Bank must also
obtain approval from the OTS prior to the payment of any dividends to the
Company. In addition, under FDICIA, the Bank may not pay a dividend if, after
paying the dividend, the Bank would be undercapitalized.
Branching. As a federal savings bank, there are no regulatory
restrictions on the Bank's ability to branch within or without the state of
Georgia.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, a financial institution's primary federal regulator
(this is the OTS for the Bank) shall evaluate the record of the financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe and sound
operation of those institutions. These factors are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility.
Liquidity. Under applicable federal regulations, savings associations
are required to maintain an average daily balance of liquid assets (including
cash, certain time deposits, certain bankers' acceptances, certain corporate
debt securities and highly rated commercial paper, securities of certain mutual
funds and specified United States government, state or federal agency
obligations) equal to a monthly average of not less than a specified percentage
of the average daily balance of the savings association's net withdrawable
deposits plus short-term borrowings. Under HOLA, this liquidity requirement may
be changed from time to time by the OTS to any amount within the range of 4% to
10% depending upon economic conditions and the deposit flows of member
institutions, and currently is 5%. Savings institutions also are required to
maintain an average daily balance of short-term liquid assets at a specified
percentage (currently 1%) of the total of the average daily balance of its net
withdrawable deposits and short-term borrowings.
Equity Investments. The OTS has revised its risk-based capital
regulation to modify the treatment of certain equity investments and to clarify
the treatment of other equity investments. Equity investments that are
permissible for both savings banks and national banks will no longer be deducted
from savings associations' calculations of total capital over a five-year
period. Instead, permissible equity investments will be placed in the 100%
risk-weight category, mirroring the capital treatment prescribed for those
investments when made by national banks under the regulations of the OCC. Equity
investments held by savings associations that are not permissible for national
banks must still be deducted from assets and total capital.
Qualified Thrift Lender Requirement. A federal savings bank is deemed
to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift
investments" equal or exceed 65% of its "portfolio assets" on a monthly
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<PAGE> 28
average basis in nine out of every 12 months. Qualified thrift investments
generally consist of (i) various housing related loans and investments (such as
residential construction and mortgage loans, home improvement loans, mobile home
loans, home equity loans and mortgage-backed securities), (ii) certain
obligations of the FDIC, and (iii) shares of stock issued by any FHLB, the FHLMC
or the FNMA. Qualified thrift investments also include certain other specified
investments, subject to a percentage of portfolio assets limitation. For
purposes of the QTL test, the term "portfolio assets" means the savings
institution's total assets minus goodwill and other intangible assets, the value
of property used by the savings institution to conduct its business, and liquid
assets held by the savings institution in an amount up to 20% of its total
assets.
OTS regulations provide that any savings association that fails to meet
the definition of a QTL must either convert to a national bank charter or limit
its future investments and activities (including branching and payments of
dividends) to those permitted for both savings associations and national banks.
Further, within one year of the loss of QTL status, a holding company of a
savings association that does not convert to a bank charter must register as a
bank holding company and will be subject to all statutes applicable to bank
holding companies. In order to exercise the powers granted to federally
chartered savings associations and maintain full access to FHLB advances, the
Bank must meet the definition of a QTL.
Loans to One Borrower Limitations. HOLA generally requires savings
associations to comply with the loans to one borrower limitations applicable to
national banks. National banks generally may make loans to a single borrower in
amounts up to 15% of their unimpaired capital and surplus, plus an additional
10% of capital and surplus for loans secured by readily marketable collateral.
HOLA provides exceptions under which a savings association may make loans to one
borrower in excess of the generally applicable national bank limits. A savings
association may make loans to one borrower in excess of such limits under one of
the following circumstances: (i) for any purpose, in any amount not to exceed
$500,000; or (ii) to develop domestic residential housing units, in an amount
not to exceed the lesser of $30 million or 30% of the savings association's
unimpaired capital and unimpaired surplus, provided other conditions are
satisfied.
Commercial Real Property Loans. HOLA limits the aggregate amount of
commercial real estate loans that a federal savings association may make to an
amount not in excess of 400% of the savings association's capital.
ELIMINATION OF FEDERAL SAVINGS ASSOCIATION CHARTER
Legislation that would eliminate the federal savings association
charter is under discussion. If such legislation is enacted, the Bank would be
required to convert its federal savings bank charter to either a national bank
charter or to a state depository institution charter. Various legislative
proposals also may result in the restructuring of federal regulatory oversight,
including, for example, consolidation of the OTS into another agency, or
creation of a new Federal banking agency to replace the various such agencies
which presently exist. The Bank is unable to predict whether such legislation
will be enacted or, if enacted, what the effect of such legislation will be.
Federal Home Loan Bank System. The FHLB System consists of 12 regional
FHLBs, each subject to supervision and regulation by the Federal Housing Finance
Board. The FHLBs provide a central credit facility for member savings
associations. The maximum amount that the FHLB of Atlanta will advance
fluctuates from time to time in accordance with changes in policies of the
Federal Home Finance Board and the FHLB of Atlanta, and the maximum amount
generally is reduced by borrowings from any other source. In addition, the
amount of FHLB advances that a savings association may obtain will be restricted
in the event the institution fails to constitute a QTL.
Federal Reserve System. The Federal Reserve Board has adopted
regulations that require savings associations to maintain nonearning reserves
against their transaction accounts (primarily NOW and regular checking
accounts). These reserves may be used to satisfy liquidity requirements imposed
by the OTS. Because
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<PAGE> 29
required reserves must be maintained in the form of cash or a
non-interest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce the amount of the Bank's interest-earning
assets.
Savings institutions also have the authority to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations, however, require
savings associations to exhaust all FHLB sources before borrowing from a Federal
Reserve bank.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution will be fulfilling its obligation to
help meet the housing needs of the community it serves; the Equal Credit
Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit; the Fair Credit Reporting Act of 1978,
governing the use and provision of information to credit reporting agencies; the
Fair Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies; and the rules and regulations of the various
federal agencies charged with the responsibility of implementing such federal
laws. The deposit operations of the Bank also are subject to the Right to
Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal Reserve Board to implement that act,
which governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.
ENFORCEMENT POWERS
FIRREA expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties" (primarily including management,
employees, and agents of a financial institution, and independent contractors
such as attorneys and accountants and others who participate in the conduct of
the financial institution's affairs). These practices can include the failure of
an institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such violations. Criminal penalties for
some financial institution crimes have been increased to twenty years. In
addition, regulators are provided with greater flexibility to commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, FIRREA expanded the appropriate banking agencies' power to issue
cease-and-desist orders that may, among other things, require affirmative action
to correct any harm resulting from a violation or practice, including
restitution, reimbursement, indemnifications or guarantees against loss. A
financial institution may also be ordered to restrict its growth, dispose of
certain assets, rescind agreements or contracts, or take other actions as
determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
From time to time, various bills are introduced in the United States
Congress with respect to the regulation of financial institutions. Certain of
these proposals, if adopted, could significantly change the regulation of banks
and the financial services industry. The Company cannot predict whether any of
these proposals will be adopted or, if adopted, how these proposals would affect
the Company.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings of the Bank will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies. The Federal Reserve Board's monetary policies have
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<PAGE> 30
had, and will likely continue to have, an important impact on the operating
results of commercial banks through its power to implement national monetary
policy in order, among other things, to curb inflation or combat a recession.
The monetary policies of the Federal Reserve Board have major effects upon the
levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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<PAGE> 31
MANAGEMENT
GENERAL
The following table sets forth the respective names, positions with the
Company and the Bank, and anticipated subscriptions of the Organizers. The
Organizers may elect to purchase more than the shares indicated below.
Additionally, in recognition of their acceptance of the financial risks incurred
in connection with the organization of the Company and the Bank, the Organizers
will be granted, for nominal consideration, warrants to purchase one share of
Common Stock for each share purchased by them in this offering. See "Management
- - Stock Warrants."
<TABLE>
<CAPTION>
Anticipated Subscription
-----------------------------------------------
Percentage of Percentage of
Position With Number of Minimum Maximum
Name Company/Bank(1) Shares(2) Offering(3) Offering(4)
---- --------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Gary M. Bremer Class II Director; 20,000 3.70% 1.33%
Organizer
Richard C. Carter Class II Director; 10,000 1.85% 0.66%
Organizer
Louis J. Douglass, III Class II Director; 10,000 1.85% 0.66%
President; Chief Executive
Officer of the Bank;
Organizer
Terry L. Ferrero Class I Director; 20,000 3.70% 1.33%
Organizer
Stephen R. Gross Organizer 10,000 1.85% 0.66%
G. Webb Howell Class I Director; 12,500 2.31% 0.83%
Organizer
Frank E. Perisino Class III Director; 10,000 1.85% 0.66%
Organizer
Richard A. Parlontieri Class III Director; 12,500 2.31% 0.83%
Chairman; Chief Executive
Officer of the Company;
Organizer
Donnie Russell Class I Director; 10,000 1.85% 0.66%
Organizer
TOTAL 115,000 20.91% 7.67%
======= ===== ====
</TABLE>
- -------------------------------------
(1) The terms of the Class I Directors will expire in 1998; the terms of the
Class II Directors will expire in 1999; and the terms of the Class III
Directors will expire in 2000.
(2) All of such purchases will be at a price of $10.00 per share, the same
price at which shares are being offered to the public. Additionally, in
recognition of their acceptance of the financial risks incurred in
connection with the organization of the Company and the Bank, the
Organizers will be granted, for nominal consideration, warrants to
purchase one share of Common Stock for each share purchased by them in
this offering. See "Management -- Stock Warrants." Assuming that the
Organizers purchase the indicated number of shares in this offering, and
assuming all warrants issued in conjunction with shares purchased by the
Organizers are exercised, the Organizers would own, as a group, 35.1% of
the Common Stock to be outstanding upon the completion of this offering
and exercise of the warrants if the minimum number of shares is sold and
14.2% of the Common Stock if the maximum number of shares is sold and the
warrants exercised. No person is expected to own more than 5% of the
shares of the Common Stock immediately after the offering. However,
Organizers may purchase up to 100% of the shares in the offering if
necessary for the Company to achieve the minimum capital requirement and
also may decide to purchase additional shares in
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<PAGE> 32
the offering even if the minimum offering is fully subscribed. Any
shares purchased by the Organizers in excess of their original
commitment will be purchased for investment and not with a view to the
resale of such shares. Although each Organizer has agreed with the
other Organizers that he will subscribe for the number of shares
indicated above, neither the Organizers nor any other subscriber will
be obligated to purchase shares except pursuant to a valid subscription
agreement executed after receipt of this Prospectus. There is no formal
written agreement among the Organizers regarding the number of shares
they intend to purchase. This table includes shares which are expected
to be beneficially owned by the Organizers upon completion of the
offering.
(3) Assumes that the minimum number of 550,000 shares are sold in this
offering.
(4) Assumes that the maximum number of 1,500,000 shares are sold in this
offering.
All of the Organizers (other than Mr. Gross) will serve as directors of
the Company and the Bank.
BIOGRAPHICAL INFORMATION
GARY M. BREMER, age 58, is founder and Chairman of Simione Central
Holdings, Inc., a publicly traded Information Systems and Management Services
Company in the home health industry. He is founder and former Chairman/CEO of
Central Health Services. He is currently a Director and Treasurer of NAHC
(National Association of Home Care), co-founder and Director for the Foundation
for Medically Fragile Children, Member of the Board for the Caring Institute,
Member of the Board for the Foundation for Hospice and Home Care, and co-founder
for the HUG Center (a non-profit organization which provides day care services
to chronically ill children). He is currently a director of Fayette County Bank.
Mr. Bremer has also served on Speaker Newt Gingrich's Medicare Advisory Council.
RICHARD C. CARTER, age 48, is Vice President of Marketing with Life of
the South Insurance Company. He is a graduate of Troy State University, Troy,
Alabama, where he majored in Business Management. He has over twenty years
experience in marketing and management of health and financial services
insurance products. Carter is a charter member of the Association of Health
Insurance Agents and is a member of the National Association of Life
Underwriters, Atlanta South Association. He holds the designation of Certified
Health Consultant.
LOUIS J. DOUGLASS, III, age 53, has been the proposed President and
Chief Executive Officer of the Bank since December 1, 1997. From 1993 until he
joined the Bank, he served as a director and an executive vice president of
Regions Bank, Forsyth County, Georgia (formerly Peoples Bank of Forsyth, an
affiliate of First National Bank of Gainesville), where he was responsible for
branch managers, commercial lenders, construction lending department, loan
operations, and day to day activities of managing the bank. Prior to his
community bank experience, Mr. Douglass was with Citizens and Southern National
Bank for over 20 years. While at C&S he was responsible for both the commercial
and retail sides of the bank in several districts which ranged in size from 16
to 24 branches throughout greater Atlanta. From 1994 to 1996, Mr. Douglass
served as Treasurer of the Forsyth Rotary Club. He was also on the Construction
Committee (1995-1996), Nominating Committee (1996-1997) and Yacht Club Committee
(1997) for the Atlanta Athletic Club. From 1993 to 1996 he served as the
director for Sawnee Community Center. Mr. Douglass has also served as a director
for the Northeast Chapter- Robert Morris Associates and the Forsyth Chamber of
Commerce Economic Development Committee. From 1995 to 1996 Mr. Douglass was
involved in the Sheshunoff Affiliation Program. He has also actively
participated in the Marist Booster Club and the Georgia Bankers Association.
TERRY L. FERRERO, age 46, is President and Chief Executive Officer of
American Wholesale Building Supply Company, a wholesale distributor of building
supplies in Georgia, Alabama, Florida, South Carolina and Tennessee. Prior to
founding American Wholesale, Mr. Ferrero was a Sales Executive with Building
Products Division of United States Steel Corporation for over 15 years. Mr.
Ferrero serves on numerous Advisory Boards for the building supply industry. He
is active with several charities, including Habitat for Humanity, United
Cerebral Palsy and Scottish Rite Hospital.
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<PAGE> 33
STEPHEN R. GROSS, age 50, is a founding member of Gross, Collins &
Cress, P.C. He was Regional Managing Partner, National Director of Business
Consulting, and a member of the Executive Committee of the predecessor national
accounting firm. Gross, a native of Atlanta, graduated from Duke University with
a focus in corporate finance and attended Georgia State University graduate
school majoring in accounting and tax. He has taught business planning, real
estate services and computer consulting to CPAs throughout Georgia and has been
a national speaker and trainer on these subjects.
G. WEBB HOWELL, age 44, is an Agent Field Consultant for State Farm
Insurance in Marietta, Georgia. Howell has been in the State Farm organization
since 1974. He is a Chartered Life Underwriter and a Chartered Financial
Consultant and a member of the Atlanta chapter of both of these organizations,
as well as a member of the National Association of Life Underwriters. Howell
attended Clayton College and National Louis University. He was an organizer of
First Community Bank Services, Inc., the holding company for Fayette County
Bank, and he is currently a director of Fayette County Bank.
RICHARD A. PARLONTIERI, age 51, is President/CEO of Habersham Resource
Management, a consulting firm with over 16 years experience in the financial
services industry. He was an organizer of First Community Bank Services, Inc.,
the holding company for Fayette County Bank, and he is currently a director of
Fayette County Bank. His community involvement includes currently serving as
Chairman, U.S. Selective Service Board, past City Councilman, Peachtree City,
Georgia; Chairman, Association of Fayette County Governments; Chairman,
Peachtree City Planning Commission; President, Fayette County American Heart
Association and Organizer/Director, Fayette Family YMCA.
FRANK E. PERISINO, age 53, is owner/operator of FMK Enterprises, Inc.,
which operates X-Press Car Rental and Leasing in Atlanta, Georgia, and the
National Car Rental Franchise for Albany, Georgia. Mr. Perisino also owns
X-Press Car Rental, Inc., a Florida corporation. He has held management
positions with Hertz and Budget Rent-A-Car, and has worked as a consultant to
car rental companies throughout the East Coast. He received an Associates Degree
in Business from Robert Morris College in Pennsylvania, and a Bachelor of
Science Degree from West Liberty State College in West Virginia.
DONNIE RUSSELL, age 54, is Chairman/CEO of Buddy's Homes, a 30 year old
manufactured housing sales and marketing company. He is President/CEO of Buddy's
Financial Group, Founder/Director of Chandeleur Homes, a manufactured housing
company, Director of American Heart Association of Fayette County, and Director
of GMHA. He was an organizer of First Community Bank Services, Inc., the holding
company for Fayette County Bank, and he is currently a director of Fayette
County Bank. He has a B.S. degree from Auburn University.
EMPLOYMENT AGREEMENTS
The Company has entered into a letter of employment with Mr. Douglass
for a three year term pursuant to which Mr. Douglass will serve as the President
and Chief Executive Officer of the Bank. Mr. Douglass will be paid a salary of
$110,000, plus his yearly medical insurance premium. Mr. Douglass will be
eligible to participate in any management incentive program of the Bank or any
long-term equity incentive program and will be eligible for grants of stock
options and other awards thereunder. Upon the closing of the offering (or as
soon thereafter as an appropriate stock option plan is adopted by the Company),
Mr. Douglass will be granted an option to purchase 10,000 shares of Common Stock
at $10.00 per share. The options will vest over a three-year period and will
have a term of ten years. Additionally, Mr. Douglass will participate in the
Bank's retirement, welfare and other benefit programs and is entitled to a life
insurance policy and an accident liability policy and reimbursement for
automobile expenses, club dues, and travel and business expenses. The letter of
employment with Mr. Douglass also provides that following termination of his
employment with the Bank and for a period of twelve months thereafter, Mr.
Douglass, may not (i) be employed in the banking business as a director, officer
at the vice-president level or higher, or organizer or promoter of, or provide
executive management services to, any financial institution within a ten-mile
radius of the Bank's offices, (ii) solicit major customers of the Bank for the
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<PAGE> 34
purpose of providing financial services, or (iii) solicit employees of the Bank
for employment. The amount of compensation paid in 1997 to Mr. Douglass was
$9,166.67.
DIRECTOR COMPENSATION
The Organizers do not intend for the Company or the Bank to pay
directors' fees until such time as the Bank is cumulatively profitable. However,
the Company and the Bank reserve the right to pay directors' fees. In addition,
after the offering, the Company expects to adopt a stock option plan which will
permit the Company to grant options to officers, directors, key employees,
advisors, and consultants of the Company. The Company anticipates that it will
initially authorize the issuance of 175,000 shares under the stock option plan
and intends to reserve approximately 75,000 shares of these shares for issuance
to directors over a three year period.
STOCK WARRANTS
The Organizers of the Company and the Bank have indicated their
intention to purchase shares of the Common Stock offered hereby at a price
$10.00 per share, the same price at which shares are being offered to others. In
recognition of the financial risks undertaken by the Organizers in advancing
organization and offering expenses, the Company will allow each Organizer to
purchase at a nominal price a warrant to purchase one additional share for every
share he or she purchases in this offering. The warrants become exercisable on
the date that the Bank opens for business and will be exercisable in whole or in
part at any time during the ten-year period following that date, at an exercise
price equal to $10.00 per share. The warrants and shares issued pursuant to the
exercise of such warrants will be transferable, subject to compliance with
applicable securities laws. If the OTS issues a capital directive or other order
requiring the Bank to obtain additional capital, the warrants will be forfeited
if not then exercised.
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The Company and the Bank expect to have banking and other transactions
in the ordinary course of business with Organizers, directors, and officers of
the Company and the Bank and their affiliates, including members of their
families or corporations, partnerships, or other organizations in which such
Organizers, officers, or directors have a controlling interest, on substantially
the same terms (including price, or interest rates and collateral) as those
prevailing at the time for comparable transactions with unrelated parties. Such
transactions are not expected to involve more than the normal risk of
collectability nor present other unfavorable features to the Company and the
Bank. Loans to individual directors and officers must also comply with the
Bank's lending policies and statutory lending limits, and directors with a
personal interest in any loan application will be excluded from the
consideration of such loan application. The Company intends for all of its
transactions with Organizers or other affiliates of the Company or the Bank to
be on terms no less favorable to the Company than could be obtained from an
unaffiliated third party and to be approved by a majority of the Company's
disinterested directors.
EXCULPATION AND INDEMNIFICATION
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to the
Company or its shareholders for any breach of duty as a director. There is no
limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from which
the director derives an improper personal benefit; or as to any payments of a
dividend or any other type of distribution that is illegal under Section
14-2-832 of the Georgia Business Corporation Code (the "Code"). In addition, if
at any time the Code shall have been amended to authorize further elimination or
limitation of the liability of director, then the liability of each director of
the Company shall be eliminated or limited to the fullest extent permitted by
such provisions, as so amended, without further action by the shareholders,
unless the provisions of the Code require such action. The provision does not
limit the right of the
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<PAGE> 35
Company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 14-2-852 and 14-2-857 of the Code. To the extent
that a director or officer of the Company has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer of the Company, Sections
14-2-852 and 14-2-857 of the Code would require the Company to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred in connection therewith. The Code expressly allows the Company to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company and the
Bank pursuant to the Articles of Incorporation or Bylaws, or otherwise, the
Company and the Bank have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
intends to extend indemnification rights to all of its executive officers.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). The following
summary describes the material terms of the Company's capital stock. Reference
is made to the Articles of Incorporation of the Company, which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, for
a detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of the Common Stock are entitled to receive such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor. The Company does not plan to declare any
dividends in the immediate future. See "Dividend Policy." Holders of Common
Stock are entitled to one vote per share on all matters on which the holders of
Common Stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund rights.
In the event of a liquidation, dissolution or winding-up of the Company, holders
of Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of the
Company and the liquidation preference of any outstanding Preferred Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company hereby when issued will be, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to any
classes or series of Preferred Stock that the Company may issue in the future.
There currently is no market for the shares and, although the Company
has filed a registration statement with the SEC to register the issuance of the
Common Stock in the offering under the Securities Act of 1933, it is not likely
that any trading market will develop for the shares in the future. There are no
present plans for the Common Stock to be traded on any stock exchange or in the
over-the-counter market.
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<PAGE> 36
PREFERRED STOCK
The Articles provide that the Board of Directors is authorized, without
further action by the holders of the Common Stock, to provide for the issuance
of shares of Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences, and relative, participating, optional and
other rights, qualifications, limitations, and restrictions thereof, including
the dividend rate, conversion rights, voting rights, redemption price, and
liquidation preference, and to fix the number of shares to be included in any
such classes or series. Any Preferred Stock so issued may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares of
Preferred Stock may have class or series voting rights. Upon completion of this
offering, the Company will not have any shares of Preferred Stock outstanding.
Issuances of Preferred Stock, while providing the Company with flexibility in
connection with general corporate purposes, may, among other things, have an
adverse effect on the rights of holders of Common Stock, and in certain
circumstances such issuances could have the effect of decreasing the market
price of the Common Stock. The Company has no present plan to issue any shares
of Preferred Stock.
CERTAIN ANTITAKEOVER EFFECTS
The provisions of the Articles, the Bylaws and the Georgia corporation
law summarized in the following paragraphs may be deemed to have antitakeover
effects and may delay, defer, or prevent a tender offer or takeover attempt that
a shareholder might consider to be in such shareholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by shareholders, and may make removal of management more
difficult.
Authorized but Unissued Stock. The authorized but unissued shares of
Common Stock and Preferred Stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of Common Stock and Preferred
Stock may enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of the Company by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of the Company's
management.
Number of Directors. The Bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
twenty-five members.
Classified Board of Directors. The Articles and Bylaws divide the Board
of Directors into three classes of directors serving staggered three-year terms.
As a result, approximately one-third of the Board of Directors will be elected
at each annual meeting of shareholders. The classification of directors,
together with the provisions in the Articles and Bylaws described below that
limit the ability of shareholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board of Directors, will have
the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual meetings
of shareholders may be required for the shareholders to change a majority of the
directors, whether or not a change in the Board of Directors would be beneficial
to the Company and its shareholders and whether or not a majority of the
Company's shareholders believes that such a change would be desirable.
Removal of Directors and Filling Vacancies. The Articles of
Incorporation provide that shareholders may not remove a director without cause.
The Bylaws also provide that all vacancies on the Board of Directors, including
those resulting from an increase in the number of directors, may be filled by a
majority of the remaining directors, even if they do not constitute a quorum.
When one or more directors resign from the Board of
35
<PAGE> 37
Directors effective at a future date, a majority of directors then in office,
including the directors who are to resign, may vote on filling the vacancy.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals and
shareholder nominations for the election of directors at any meeting of
shareholders must be in writing and be received by the Secretary of the Company
not later than ninety days prior to the meeting. The Company may reject a
shareholder proposal or nomination that is not made in accordance with such
procedures.
Certain Nomination Requirements. Pursuant to the Bylaws, the Company
has established certain nomination requirements for an individual to be elected
as a director of the Company at any annual or special meeting of the
shareholders, including that the nominating party provide the Company within a
specified time prior to the meeting (i) notice that such party intends to
nominate the proposed director; (ii) the name of and certain biographical
information on the nominee; and (iii) a statement that the nominee has consented
to the nomination. The chairman of any shareholders' meeting may, for good cause
shown, waive the operation of these provisions. These provisions could reduce
the likelihood that a third party would nominate and elect individuals to serve
on the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of
550,000 and a maximum of 1,500,000 shares of Common Stock outstanding. The
shares sold in this offering will be freely tradable, without restriction or
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company, which will be subject to resale restrictions under
the Securities Act. An affiliate of the issuer is defined in Rule 144 under the
Securities Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the person whether through the ownership of
voting securities, by contract or otherwise. Directors of the Company and the
Bank will likely be deemed to be affiliates. These securities held by affiliates
may be sold without registration in accordance with the provisions of Rule 144
or another exemption from registration.
In general, under Rule 144, an affiliate of the Company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the Common Stock or
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the Securities
Act, and the person selling the securities may not solicit orders or make any
payment in connection with the offer or sale of securities to any person other
than the broker who executes the order to sell the securities. This requirement
may make the sale of the Common Stock by affiliates of the Company pursuant to
Rule 144 difficult if no trading market develops in the Common Stock. Rule 144
also requires persons holding restricted securities to hold the shares for at
least one year prior to sale.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
Certain legal matters will be passed upon in connection with the offering by the
Sales Agent by Carlile Patchen & Murphy LLP, Columbus, Ohio.
36
<PAGE> 38
EXPERTS
The financial statements of the Company dated December 31, 1997, and
for the period from August 22, 1997 (inception), until December 31, 1997, have
been audited by Bricker & Melton, P.A., as stated in their report appearing
elsewhere herein, and have been so included in reliance on the report of such
firm given upon their authority as an expert in accounting and auditing.
37
<PAGE> 39
----------------------------------------
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
FINANCIAL STATEMENTS
DECEMBER 31, 1997
C O N T E N T S
----------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report......................................F-1
Balance Sheet - December 31, 1997.................................F-2
Statement of Operations for the Period
from Inception (August 22, 1997)
to December 31, 1997...........................................F-3
Statement of Changes in Stockholders'
Equity for the Period from
Inception (August 22, 1997) to December 31, 1997...............F-4
Statement of Cash Flows for the Period
from Inception (August 22, 1997)
to December 31, 1997...........................................F-5
Notes to Financial Statements as of and
for the Period from Inception
(August 22, 1997) to December 31, 1997.........................F-6
</TABLE>
<PAGE> 40
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Southeast Commerce Holding Company
(A Development Stage Corporation)
Atlanta, Georgia
We have audited the accompanying balance sheet of Southeast Commerce Holding
Company (a development stage corporation), as of December 31, 1997, and the
related statements of operations, changes in stockholders' equity and cash flows
for the period from inception (August 22, 1997) to December 31, 1997. These
financial statements are the responsibility of Southeast Commerce Holding
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southeast Commerce Holding
Company as of December 31, 1997, and the results of its operations, changes in
stockholders' equity and cash flows for the period from inception (August 22,
1997) to December 31, 1997, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
Southeast Commerce Holding Company will continue as a going concern. As
discussed in Note 1 to the financial statements, Southeast Commerce Holding
Company is in the organization stage and has not commenced operations. Also, as
discussed in Note 2, Southeast Commerce Holding Company's future operations are
dependent on obtaining capital through an initial stock offering and obtaining
the necessary final regulatory approvals to operate under a federal savings bank
charter. These factors and the expense associated with the development of a new
banking institution raise substantial doubt about Southeast Commerce Holding
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 2. The financial statements do not
include any adjustments relating to the recoverability of reported asset amounts
or the amount of liabilities that might result from the outcome of this
uncertainty.
February 28, 1998
Duluth, Georgia
F-1
<PAGE> 41
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash $ --
---------
Total current assets --
---------
Fixed assets (Note 4) 50,000
Deferred organizational costs 84,926
Prepaid expenses 7,228
Other assets 18,347
---------
TOTAL ASSETS $ 160,501
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable $ 65,161
Note payable (Note 2) 170,000
---------
TOTAL LIABILITIES 235,161
---------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per
share; 10,000,000 shares authorized,
no shares issued and outstanding --
Common stock, par value $.01 per
share; 10,000,000 shares authorized, 10
shares issued and outstanding --
Additional paid-in capital 100
Deficit accumulated during the development stage (74,760)
---------
TOTAL STOCKHOLDERS' EQUITY (74,660)
---------
Commitments and contingencies (Note 4) --
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 160,501
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 42
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS'
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
EXPENSES
<TABLE>
<S> <C>
Interest expense $ 2,909
Salaries and employee benefits 51,780
Rent expense 8,351
Other operating 11,720
-------
Total Expenses 74,760
-------
Income tax expense (benefit) (Note 3) --
-------
NET LOSS $74,760
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 43
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS'
FOR THE PERIOD FROM INCEPTION (AUDGUST 22, 1997) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock Capital Stage Total
------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Proceeds from the sale of 10
organization shares $ -- $ 100 $ -- $ 100
Net Loss -- -- (74,760) (74,760)
----- ----- -------- --------
BALANCE, DECEMBER 31, 1997 $ -- $ 100 $(74,760) $(74,660)
===== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 44
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS'
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net loss $ (74,760)
Adjustments to reconcile net loss to
net cash used by operating activities:
Increase in prepaid and other assets (25,575)
Increase in accounts payable 65,161
---------
NET CASH USED BY OPERATING ACTIVITIES (35,174)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Deferred organizational costs (84,926)
Purchase of fixed assets (50,000)
---------
NET CASH USED BY INVESTING ACTIVITIES (134,926)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of organization shares 100
Proceeds from loan by organizers 8,000
Repayment of loan by organizers (8,000)
Proceeds from note payable 170,000
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 170,100
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS --
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD --
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD --
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 45
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
NOTE 1--ORGANIZATION
Southeast Commerce Holding Company was formed to organize and own all of the
capital stock of Commerce Bank (the Bank); together they are herein referred to
as "the Company." The organizers of the Company filed an application to charter
the Bank as a federal savings bank with the Office of Thrift Supervision.
Provided the necessary capital is raised and the necessary regulatory approvals
are received, it is expected that operations will commence in the second quarter
of 1998.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry.
The Company plans to raise a minimum of $5,500,000 through an offering of its
$.01 par value common stock. The organizers, directors and members of their
immediate families expect to subscribe for a minimum in the aggregate of
approximately $1,150,000 of the Company's common stock at a purchase price of
$10.00 per share.
Upon the completion of the sale of common stock and the opening of the Bank,
incurred organization costs, estimated to be $175,000 ($100,000 for the Bank and
$75,000 for the Company, consisting principally of legal, regulatory, consulting
and incorporation fees) will be deferred and amortized over the Bank's and the
Company's initial 60 months of operations. Offering expenses, estimated to be
$75,000, (consisting principally of direct incremental costs of the stock
offering) will be deducted from the proceeds of the offering, and pre-opening
expenses, estimated to be $150,000, (consisting principally of salaries,
overhead and other operating costs) will be charged against the initial period's
operating results.
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts due from banks.
NOTE 2--LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Company incurred a net loss of $74,760 for the period from inception
(August 22, 1997) to December 31, 1997. Operations through December 31, 1997,
relate primarily to expenditures for incorporating and organizing the Company.
At August 22, 1997, the Company had been totally funded by an $8,000 loan
from the organizers. On August 27, 1997, the organizers established a line of
credit to pay back the organizers (without interest) and provide operating funds
until permanent funding was obtained.
F-6
<PAGE> 46
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
NOTE 2--LIQUIDITY AND GOING CONCERN CONSIDERATIONS, (Continued)
At December 31, 1997, the Company is totally funded by a $500,000 line of
credit with a bank at adjustable prime rate, currently 8.5 percent. The line of
credit is unsecured and requires interest only payments on a quarterly basis
with total principal plus interest due at maturity on August 27, 1998. Personal
guarantees of the organizers, up to $83,333 each, were required by the lender.
This line of credit has been used to repay (without interest) the organizers'
$8,000 initial funding of the Company and to provide additional operating funds
until permanent funding was obtained. As of December 31, 1997, approximately
$170,000 has been drawn against this line of credit. Management believes that
the current level of expenditures is well within the financial capabilities of
the organizers and is adequate to meet existing obligations and fund current
operations, but commencing banking operations is dependent upon the Company
successfully completing the stock offering and obtaining regulatory approval.
To provide permanent funding for its operation, the Company is currently
anticipating offering a minimum of 550,000 and a maximum of 1,500,000 shares of
its common stock, $.01 par value, at $10 per share in an initial public
offering. Costs related to the organization and registration of the Company's
common stock will be paid from the gross proceeds of the offering. Should
subscriptions for the minimum offering not be obtained, amounts paid by
subscribers with their subscriptions will be returned and the offer will be
withdrawn.
NOTE 3--INCOME TAXES
There was no provision (benefit) for income taxes for the period from
inception (August 22, 1997) to December 31, 1997, due to the Company's net
operating loss and its valuation reserve against deferred tax assets.
The following difference gives rise to deferred income taxes as of December
31, 1997:
<TABLE>
<S> <C>
Net operating loss carryforward $ 25,418
Valuation reserve (25,418)
--------
Net deferred tax asset $ --
========
</TABLE>
As of December 31, 1997, the Company has a net operating loss carryforward of
approximately $74,760.
F-7
<PAGE> 47
SOUTHEAST COMMERCE HOLDING COMPANY
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (AUGUST 22, 1997) TO DECEMBER 31, 1997
NOTE 4--COMMITMENTS
The Company entered into a letter of employment with the President and Chief
Executive Officer of the Bank. The letter of employment continues for three
years and provides for an annual base salary of $110,000 per year, plus an
annual medical insurance premium and such other benefits as hospitalization,
disability and life insurance, which are generally made available to other
senior executives of the Company and the Bank.
On October 14, 1997, the Company entered into a lease agreement for office
space at its planned main office location, subject to the following conditions
(i) preliminary and final charter approval is received from the Office of Thrift
Supervision, (ii) the Federal Deposit Insurance Corporation (FDIC) approves said
chartered association for FDIC-provided insurance, and (iii) the Company raises
not less than $5,000,000 in capital. The anticipated commencement date of the
lease is April 1, 1998, with a ten-year term. The Company has deposited
$18,347.50 as of December 31, 1997, which includes a security deposit of
$9,173.25 and the initial payment of $9,173.25. The monthly base rent will be
$9,173.25 per month through March 31, 2000, $10,419.00 per month through March
31, 2003 and $11,325.00 per month through March 31, 2008.
On December 30, 1997, the Company entered into a software license agreement for
the data processing applications and implementation of the company's electronic
data processing system. The agreement provides for a total of $313,500 plus
related expenses and is to be full paid in 1998. As of December 31, 1997, a
deposit of $50,000 has been made.
F-8
<PAGE> 48
SOUTHEAST COMMERCE HOLDING COMPANY
STOCK ORDER FORM/SUBSCRIPTION AGREEMENT
TO: Southeast Commerce Holding Company
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
Gentlemen:
You have informed me that Southeast Commerce Holding Company, a Georgia
corporation (the "Company"), is offering up to 1,500,000 shares of its Common
Stock, par value $.01 per share (the "Common Stock"), at a price of $10.00 per
share payable as provided herein and as described in and offered pursuant to the
Prospectus furnished with this Subscription Agreement to the undersigned (the
"Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in United
States currency by check, bank draft, or money order payable to "The Bankers
Bank as Escrow Agent for Southeast Commerce Holding Company" the amount
indicated below (the "Funds"), representing the payment of $10.00 per share for
the number of shares of Common Stock indicated below. The total subscription
price must be paid at the time the Subscription Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole or
in part, for any reason whatsoever. The Company may reduce the number of shares
for which the undersigned has subscribed, indicating acceptance of less than all
of the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he or she
has received a copy of the Prospectus. This Subscription Agreement creates a
legally binding obligation and the undersigned agrees to be bound by the terms
of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to the Company, it may not be withdrawn and that this
Agreement shall survive the death or disability of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR SHE
MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF 1933 AND
THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE> 49
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
<TABLE>
<S> <C>
- --------------------------------------- --------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please Print)
for (minimum shares)
-------
$
-------------------------------------- --------------------------------------------
Total Subscription Price at Please indicate form of ownership desired
$10.00 per share (funds (individual, joint tenants with right of
must be enclosed) survivorship, tenants in common, trust
corporation, partnership, custodian, etc.)
Date: (L.S.)
---------------------------------- ------------------------------------------
Signature of Subscriber(s)*
(L.S.)
- --------------------------------------- ------------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
</TABLE>
Street (Residence) Address:
---------------------------------------
---------------------------------------
---------------------------------------
City, State and Zip Code
*When signing as attorney, trustee, administrator, or guardian, please
give your full title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
TO BE COMPLETED BY THE COMPANY:
Accepted as of , 199 , as to shares.
---------------- -- -----------
SOUTHEAST COMMERCE HOLDING
COMPANY
-------------------------
By:
Title:
A-2
<PAGE> 50
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the Escrow Agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his
or her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the IRS. Certain taxpayers, including all corporations, are not
subject to these backup withholding and reporting requirements.
If the shareholder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, "Applied For" should be
written in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) The number shown on
this form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject to
backup withholding because: (a) I am exempt from backup withholding; or (b) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or
dividends; or (c) the IRS has notified me that I am no longer subject to backup
withholding.
You must cross out item (ii) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are not longer subject to backup withholding, do not cross out
item (ii).
Each subscriber should complete this section.
- ----------------------------------------- ----------------------------------
Signature of Subscriber Signature of Subscriber
- ----------------------------------------- ----------------------------------
Printed Name Printed Name
- ----------------------------------------- ----------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
A-3
<PAGE> 51
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby. If given or made, such
information and representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder at any time shall under any circumstances create any implication that
the information herein is correct at any time after the date hereof.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports to Shareholders.....................Inside Cover
Additional Information......................Inside Cover
Summary ...............................................3
Risk Factors...........................................6
The Offering..........................................10
Use of Proceeds.......................................13
Capitalization........................................15
Dividend Policy ......................................16
Plan of Operation.....................................16
Proposed Business.....................................17
Supervision and Regulation............................21
Management............................................28
Description of Capital Stock of the Company...........32
Legal Matters.........................................34
Experts...............................................34
Financial Statements ................................F-1
Subscription Agreement...............................A-1
</TABLE>
-------------------------
UNTIL __________, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,500,000 SHARES
SOUTHEAST COMMERCE
HOLDING COMPANY, INC.
A PROPOSED HOLDING COMPANY FOR
COMMERCE BANK
(PROPOSED)
COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
BANK STOCK FINANCIAL SERVICES, INC.
____________, 1998
<PAGE> 52
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision which,
subject to certain limited exceptions, limits the liability of a director to the
Company or its shareholders for any breach of duty as a director. There is no
limitation of liability for: a breach of duty involving appropriation of a
business opportunity of the Company; an act or omission which involves
intentional misconduct or a knowing violation of law; any transaction from which
the director derives an improper personal benefit; or as to any payments of a
dividend or any other type of distribution that is illegal under Section
14-2-832 of the Georgia Business Corporation Code (the "Code"). In addition, if
at any time the Code shall have been amended to authorize further elimination or
limitation of the liability of director, then the liability of each director of
the Company shall be eliminated or limited to the fullest extent permitted by
such provisions, as so amended, without further action by the shareholders,
unless the provisions of the Code require such action. The provision does not
limit the right of the Company or its shareholders to seek injunctive or other
equitable relief not involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the protection
expressly mandated in Sections 14-2-852 and 14-2-857 of the Code. To the extent
that a director or officer of the Company has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer of the Company, Sections
14-2-852 and 14-2-857 of the Code would require the Company to indemnify such
persons against expenses (including attorney's fees) actually and reasonably
incurred in connection therewith. The Code expressly allows the Company to
provide for greater indemnification rights to its officers and directors,
subject to shareholder approval.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company and the
Bank pursuant to the Articles of Incorporation or Bylaws, or otherwise, the
Company and the Bank have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
has extended or intends to extend indemnification rights to all of its executive
officers.
The Company has the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the Company
against any liability asserted against him or incurred by him in any such
capacity, whether or not the Company would have the power to indemnify him
against such liability under the bylaws.
<PAGE> 53
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting commissions) of the sale of
the shares of Common Stock are as follows:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $ 4,545
Printing and Engraving 10,000
Legal Fees and Expenses 40,000
Accounting Fees 10,000
Blue Sky Fees and Expenses 6,000
Miscellaneous Disbursements 5,000
-------
TOTAL $75,545
=======
</TABLE>
Item 26. Recent Sales of Unregistered Securities
On August 23, 1997, the Company issued ten shares of its Common Stock
to one of its Organizers, Mr. Richard A. Parlontieri, in order to complete the
Company's organization. The price per share was $10.00 for a total purchase
price of $100.00. There were no underwriting discounts or commissions paid with
respect to this transaction. The Company has the right to redeem Mr.
Parlontieri's stock at the original purchase price of $100.00 and intends to do
so upon completion of this offering. The sale was exempt under Section 4(2) of
the Securities Act of 1933.
Item 27. Exhibits.
<TABLE>
<S> <C>
1.1. Form of Underwriting Agreement among the Company and Banc Stock
Financial Services, Inc.
3.1. Articles of Incorporation*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the Common
Stock*
4.2. Form of Certificate of Common Stock*
5.1. Opinion Regarding Legality*
10.1. Letter of Employment dated November 18, 1997, between the Company and
Louis J. Douglass, III
10.2. Line of Credit Agreement dated August 27, 1997, between The Company and
The Bankers Bank*
10.3. Lease Agreement dated October 14, 1997, between the Company, as lessee,
and Regent Paces Ferry Office I, Inc., as lessor*
10.4. Form of Escrow Agreement among the Company, Banc Stock Financial
Services, Inc., and The Bankers Bank
10.5. Phoenix International Ltd., Inc. Software License Agreement
10.6. Letter of Intent dated February 20, 1998 between the Company and Banc
Stock Financial Services, Inc.
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)*
</TABLE>
II-2
<PAGE> 54
<TABLE>
<S> <C>
24.1. Power of Attorney*
27.1. Financial Data Schedule (for electronic filing purposes)*
</TABLE>
- ------------------------
* Previously filed
Item 28. Undertakings.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions described in Item
24 above, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Atlanta,
State of Georgia, on March 5, 1998.
SOUTHEAST COMMERCE HOLDING COMPANY
By: /s/ Richard A. Parlontieri
--------------------------
Richard A. Parlontieri
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
*
- -------------------------------
Gary M. Bremer Director March 5, 1998
*
- -------------------------------
Richard C. Carter Director March 5, 1998
/s/ Louis J. Douglass, III
- -------------------------------
Louis J. Douglass, III Director March 5, 1998
*
- -------------------------------
Terry L. Ferrero Director March 5, 1998
*
- -------------------------------
G. Webb Howell Director March 5, 1998
</TABLE>
(Signatures continued on following page)
<PAGE> 56
SIGNATURES
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Richard A. Parlontieri
- -------------------------------
Richard A. Parlontieri President; March 5, 1998
Chief Executive Officer
of the Company;
Principal Accounting and
Financial Officer;
Director
*
- -------------------------------
Frank E. Perisino Director March 5, 1998
*
- -------------------------------
Donnie Russell Director March 5, 1998
*By: /s/ Richard A. Parlontieri
----------------------------
Richard A. Parlontieri,
as attorney-in-fact
</TABLE>
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1.1. Form of Underwriting Agreement among the Company and Banc Stock
Financial Services, Inc.
3.1. Articles of Incorporation*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the Common
Stock*
4.2. Form of Certificate of Common Stock*
5.1. Opinion Regarding Legality*
10.1. Letter of Employment dated November 18, 1997, between the Company and
Louis J. Douglass, III
10.2. Line of Credit Agreement dated August 27, 1997, between The Company and
The Bankers Bank*
10.3. Lease Agreement dated October 14, 1997, between the Company, as lessee,
and Regent Paces Ferry Office I, Inc., as lessor*
10.4. Escrow Agreement among the Company, Banc Stock Financial Services,
Inc., and The Bankers Bank
10.5. Phoenix International Ltd., Inc. Software License Agreement
10.6. Letter of Intent dated February 20, 1998 between the Company and Banc
Stock Financial Services, Inc.
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)*
24.1. Power of Attorney*
27.1. Financial Data Schedule (for electronic filing purposes)*
</TABLE>
- -----------------------------
* Previously filed
<PAGE> 1
EXHIBIT 1.1
1,500,000 SHARES OF COMMON STOCK
SOUTHEAST COMMERCE HOLDING COMPANY
UNDERWRITING AGREEMENT
_____________, 1998
Banc Stock Financial Services, Inc.
1105 Schrock Road
Columbus, Ohio 43229
Southeast Commerce Holding Company, a Georgia corporation (the
"Company"), on the basis of the representations, warranties, covenants and
conditions contained herein, hereby confirms the agreement made with respect to
the retention of Banc Stock Financial Services, Inc. (the "Underwriter") as the
exclusive agent of the Company to publicly offer and sell, pursuant to the terms
of this Underwriting Agreement (the "Agreement"), an aggregate of 1,500,000
Shares of Common Stock, $.01 par value per share (the "Shares") on a "550,000
Shares all or none minimum, 1,500,000 Shares maximum, best efforts" basis. If a
minimum of 550,000 Shares are sold during the offering period, the remaining
950,000 Shares will be offered on a "best efforts" basis until (1) all of the
Shares are sold; (2) the offering period expires (as defined below); or (3) the
offering is terminated by agreement between the Company and the Underwriter,
whichever first occurs.
The Company confirms the agreements made by it with respect to
the sale of the Shares by the Company as follows:
I. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with you,
the Underwriter as of the date hereof, the Effective Date (as hereafter defined)
and the Closing Date (as hereafter defined) that:
(a) A registration statement (File No. 33-41545) on Form SB-2
relating to the public offering of the Shares, including a preliminary form of
the prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act. The Company
has prepared in the same manner and proposes to file, prior to the effective
date of such registration statement (the "Effective Date"), an additional
amendment or amendments to such registration statement, including a final form
of Prospectus, copies of which shall be delivered to you. "Preliminary
Prospectus" shall mean each prospectus filed pursuant to Rule 430 of the Rules
and Regulations. The registration statement (including all financial schedules
and exhibits) as amended at the time it becomes effective and the final
prospectus included therein are respectively referred to as the "Registration
Statement" and the "Prospectus," except that (i) if the prospectus first filed
<PAGE> 2
by the Company pursuant to Rule 424(b) of the Rules and Regulations shall differ
from said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after the
effective date of such registration statement and prior to the Closing Date (as
hereinafter defined), the terms "Registration Statement" and "Prospectus" shall
include such registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or both, as the
case may be.
(b) At the time the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date (i) the Registration
Statement and Prospectus will in all respects conform to the requirements of the
Act and the Rules and Regulations; and (ii) neither the Registration Statement
nor the Prospectus will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
statements therein not misleading; provided, however, that the Company makes no
representations, warranties or agreement as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation thereof. It is
understood that the statements set forth in the Prospectus under the heading
"Underwriting" and the identity of counsel to the Underwriter under the heading
"Legal Matters" constitute the only information furnished in writing by or on
behalf of the Underwriter for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualifications, except where failure
to so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; the shares of issued and outstanding capital stock of
the Company set forth thereunder have been, or will be when issued as set forth
in the Prospectus, duly authorized, validly issued and fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of capital
stock of the Company have been granted or entered into by the Company; and the
Common Stock conforms to all statements relating thereto contained in the
Registration Statement and Prospectus.
(e) The Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated in this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.
(f) This Agreement and the Escrow Agreement referred to in
Section 2(c) of this Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the Underwriter, constitute valid and binding obligations of the
2
<PAGE> 3
Company enforceable against the Company in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally. The Company has full power and
lawful authority to authorize, issue and sell the Shares to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is required
in connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Shares, except such as may be required
under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not
in material violation, breach of or default under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of, any of the terms or
provision of, or constitute a material default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the property or
assets of the Company is subject, nor will such action result in any material
violation of the provisions of the articles of incorporation or by-laws of the
Company, as amended, or any statute or any order, rule or regulation applicable
to the Company of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus,
the Company has good and marketable title to all properties and assets described
in the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee, or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise stated
in the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Bricker & Melton, P.A., who have given their reports on
certain financial statements filed and to be filed with the Commission as part
of the Registration Statement, and which are included in the Prospectus, are
with respect to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus and the Registration Statement
present fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and related notes and schedules have been prepared in
compliance with Regulation S-X under the Securities Exchange Act of 1934, as
amended (the "1934 Act") and in accordance with generally accepted accounting
principles
3
<PAGE> 4
applied on a basis which is consistent during the periods involved.
(k) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and the Prospectus and to and
including the Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus: (i) the Company has not incurred and
will not have incurred any material liabilities or obligations, direct or
contingent, and has not entered into and will not have entered into any material
transactions other than as contemplated in the Registration Statement and the
Prospectus; (ii) the Company has not and will not have paid or declared any
dividends or have made any other distribution on its capital stock; and (iii)
there has not been and will not have been any material adverse change in the
business, financial condition or results of operations of the Company, or in the
book value of the assets of the Company, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion, or race; and no labor disputes involving the employees of
the Company exist or are imminent which might be expected to adversely affect
the conduct of the business, property or operations or the financial condition
or earnings of the Company.
(m) Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid all taxes shown as due thereon; and there is no tax deficiency
which has been or to the knowledge of the Company might be asserted against the
Company that has not been provided for in the financial statements.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or the ownership of its property as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate right to
use all material patents, patent applications trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights,
and licenses necessary for the conduct of such business and has not received any
notice of conflict with the asserted rights of others in respect thereof. To the
best knowledge of the Company, none of the activities of business of the Company
are in violation of, or cause the Company to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company.
(o) The Company has not, directly or indirectly at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
4
<PAGE> 5
(p) On the Closing Date (hereinafter defined) all transfer or
other taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Shares will have been fully paid or
provided for by the Company and all laws imposing such taxes will have been
fully complied with.
(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be described in or filed as
exhibits to the Registration Statement have been so described and/or filed.
(r) Except as set forth in the Registration Statement and
Prospectus, no holders of Common Stock or of any securities of the Company
exercisable or convertible into the Company's Common Stock have the right to
include such Common Stock or securities in the Registration Statement and
Prospectus.
(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, the Company does not have, and on the Closing Date
will not have, any material contingent liabilities.
(t) The Company has no subsidiary corporations except as
disclosed in the Registration Statement or Prospectus nor has it any equity
interest in any partnership, joint venture, association or other entity except
as disclosed in the Registration Statement or Prospectus.
(u) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the Common
Stock and each Preliminary Prospectus has complied fully in all material
respects with the requirements of the Act and the Rules and Regulations and, as
of its date, did not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading.
(v) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Stock.
(w) Item 26 of Part II of the Registration Statement
accurately discloses all shares of the Company's Common Stock sold by the
Company within the three year period prior to the date as of which information
is presented in the Registration Statement. All of such Shares were issued in
transactions which were exempt from the registration provisions of the Act and
not in violation of Section 5 thereof.
(x) Other than as set forth in the Prospectus, no person is
entitled, either directly or indirectly, to compensation from the Company, from
the Underwriter, or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter against any losses, claims, damages or liabilities,
joint or several which shall, for all purposes of this Agreement, include, but
not be limited to, all costs to defend against any such claim, so long as such
claim arises out of agreements made or allegedly made by the Company.
2. Appointment of Agent to Sell the Shares.
5
<PAGE> 6
(a) Subject to the terms and conditions of this Agreement and
upon the basis of the representations, warranties, agreements and conditions
herein contained, the Company hereby appoints the Underwriter as its exclusive
agent for a period of 90 days from the Effective Date, subject to an extension
at the discretion of the Underwriter for an additional period not to exceed 60
days, to sell the Shares, and the Underwriter, on the basis of the
representations, warranties, agreements and conditions of the Company herein,
accepts such appointment and agrees to use its best efforts on a "550,000 Shares
or none best efforts" basis to find purchasers for the Shares. If the minimum of
550,000 Shares are sold, the remaining Shares will be offered on a "best
efforts" basis until (i) all the Shares are sold; (ii) the offering period
expires; or (iii) the offering is terminated by agreement between the Company
and the Underwriter, whichever first occurs. The price at which the Underwriter
shall sell the Shares to the public, as agent for the Company, shall be $10.00
per Share, and the Company shall pay a commission of $.65 per Share in respect
of such Shares sold on behalf of the Company by the Underwriter, provided,
however, that no commission shall be payable by the Company to the Underwriter
on Shares sold to officers and directors of the Company, and a commission of
$.55 per Share shall be payable by the Company to the Underwriter on up to
250,000 Shares sold on behalf of the Company by the Underwriter to the persons
listed on attached Schedule 2(a).
(b) Provided that at least 550,000 of the Shares are sold and
paid for, the Company agrees to pay the Underwriter for its expenses an
accountable expense allowance equal to $65,000 subject to the provisions of
Section 10(b), herein, $10,000 of which has been paid to date.
(c) It is a condition of this Agreement that the Underwriter
shall use its best efforts to sell the Shares on behalf of the Company, that the
Underwriter will instruct investors to make all remittances payable to the
Escrow Agent (hereinafter defined) and that any and all funds received from such
sale, without any deduction therefrom whatsoever, including, but not limited to,
any underwriting commission or any dealer concession or otherwise shall be
forthwith deposited in an escrow account with the Escrow Agent, pursuant to the
terms of an Escrow Agreement entered into by and among the Company, the
Underwriter and the Escrow Agent (the "Escrow Agent"), no later than 12:00 noon
of the next business day after receipt. In the event 550,000 Shares are not sold
within one year from the Effective Date, all funds will be promptly refunded to
the subscribers in full, without deduction therefrom or interest thereon. During
the period of escrow, subscribers will not have the right to demand a refund of
their subscriptions. Certificates will be issued to purchasers only if the
proceeds from the sale of at least 550,000 Shares are released from escrow to
the Company. Until such time as the funds have been released, such purchasers,
if any, will be deemed subscribers and not stockholders. The funds in escrow
will be held for the benefit of those subscribers until released to the Company
and will not be subject to creditors of the Company or for the expenses of this
offering.
3. Delivery and Payment.
(a) Delivery of the Shares against payment therefor shall take
place at the office of Banc Stock Financial Services, Inc., 1105 Schrock Road,
Columbus, Ohio 43229 (or at such other place as may be designated by you) at
10:00 a.m., Eastern time, on such date after the Registration Statement has
become effective as the Underwriter shall designate, such time and date of
payment and delivery for the Shares being herein called the "Closing Date."
6
<PAGE> 7
(b) The Company will make the certificates for the Shares to
be sold hereunder available to the Underwriter for inspection at least two (2)
full business days prior to the Closing Date at the offices of the Underwriter.
The certificates shall be in such names and denominations as you may request, at
least two (2) full business days prior to the Closing Date.
4. Offering the Shares on Behalf of the Company.
It is understood that you propose to offer the Shares to the
public, solely as agent for the Company, upon the terms and conditions set forth
in the Registration Statement. The Underwriter shall commence making such offer
as agent for the Company on the Effective Date or as soon thereafter as you deem
advisable.
5. Selected Dealers. The Underwriter may offer and sell the
Shares for the Company's account through selected dealers registered with the
NASD, as selected by the Underwriter pursuant to a form of Selected Dealers
Agreement to be filed as an exhibit to the Registration Statement, pursuant to
which the Underwriter may allow a concession (out of the underwriting commission
in the event of the sale of at least 550,000 Shares) within the limits to be set
forth in the Prospectus, but all such sales by Selected Dealers shall be made by
the Company, acting through the Underwriter as agent, and not for the account of
the Underwriter.
6. Covenants of the Company. The Company covenants and agrees
with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and upon notification from the
Commission that the Registration Statement has become effective, will so advise
you and will not at any time, whether before or after the effective date, file
any amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously had been advised and furnished with a copy or to
which you or your counsel shall have objected in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (i) the completion by the Underwriter of the distribution of the Shares
contemplated hereby (but in no event more than nine months after the date on
which the Registration Statement shall have become or been declared effective)
and (ii) 90 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which, in your opinion, may be necessary or
advisable in connection with the distribution of the Shares.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares for offering in any jurisdiction, or of the institution of any proceeding
for any of such purposes, and will use its best efforts
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<PAGE> 8
to prevent the issuance of any such order, and, if issued, to obtain as soon as
possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary and Final Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriter and dealers to use the Prospectus in
connection with the sale of the Shares for such period as in the opinion of
counsel to the Underwriter the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. If, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or dealer, any event occurs of which
the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the Company or
counsel for the Underwriter should be set forth in an amendment to the
Registration Statement or a supplement to the Prospectus, in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Shares, or in case it shall be necessary to amend or supplement the Prospectus
to comply with law or with the Rules and Regulations, the Company will notify
you promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriter,
except that in case the Underwriter is required, in connection with the sale of
the Shares, to deliver a Prospectus nine months or more after the Effective Date
of the Registration Statement, the Company will upon request of the Underwriter
but at the expense of the Company, amend or supplement the Registration
Statement and Prospectus and furnish the Underwriter with reasonable quantities
of Prospectus complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations, and the 1934 Act and the rules and regulations thereunder in
connection with the offering and issuance of the Shares.
(b) The Company will use its best efforts to qualify to
register the Shares for sale under the securities or "blue sky" laws in up to
twelve (12) jurisdictions as the Underwriter may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Shares. The Company will,
from time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as the
Underwriter may reasonably request.
(c) Pending completion of the public offering, the Company
will not negotiate with any other Underwriter or other person relating to a
possible public or private offering of its securities without the prior written
consent of the Underwriter. In the event the Company enters into a Letter of
Intent and/or effectuates a public or private offering of its securities with
another broker dealer or any other person without the written permission of the
Underwriter, prior to the completion of the financing contemplated herein, the
Company shall pay to the Underwriter the sum of $10,000. In the event the
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<PAGE> 9
Company is sold, merged or otherwise disposed of before the completion of the
financing contemplated herein, the Company shall pay the Underwriter the sum of
$10,000 as a finder's fee.
(d) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the 1934 Act, the Company, at its expense, will
furnish to its stockholders an annual report, in reasonable detail (including
financial statements audited by independent public accountants), and at its
expense, will furnish to you during the period ending five (5) years from the
Effective Date, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any of its subsidiaries as at the end of such
fiscal year, together with statements of income, surplus and cash flow of the
Company and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iii) as soon as they are
available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission; and (iv) such other information as
you may from time to time reasonably request.
(e) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (d) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(f) The Company will deliver to you at or before the Closing
Date two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of all amendments thereto. The
Company will deliver to or upon the order of the Underwriter, from time to time
until the Effective Date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date of
the Registration Statement as the Underwriter may reasonably request. The
Company will deliver to the Underwriter on the Effective Date of the
Registration Statement and thereafter for so long as a Prospectus is required to
be delivered under the Act, from time to time, as many copies of the Prospectus,
in final form, or as thereafter amended or supplemented as the Underwriter may
from time to time reasonably request.
(g) The Company will make generally available to its
stockholders and deliver to you as soon as it is practicable to do so, but in no
event later than 90 days after the end of twelve months after its current fiscal
quarter, an earnings statement (which need not be audited) covering a period of
at least twelve consecutive months beginning with the Effective Date of the
Registration Statement, which shall satisfy the requirements of Section 11(a) of
the Act.
(h) The Company will apply the net proceeds from the sale of
the Shares for the purposes set forth under "Use of Proceeds" in the Prospectus,
and will file such reports with the Commission with respect to the sale of the
Shares and the application of the proceeds therefrom as may be required by
Sections 12, 13, and/or 15(d) of the 1934 Act and pursuant to Rule 463 under the
Act.
(i) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of counsel to the Underwriter may be reasonably
necessary or advisable in connection with the distribution of the Shares and
will use its best efforts to cause the same to become effective as promptly as
possible.
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<PAGE> 10
(j) The Company will reserve and keep available that maximum
number of its authorized but unissued shares of Common Stock which are issuable
upon exercise of the Options outstanding from time to time.
(k) All officers, directors and holders of five percent (5%)
or more of the Common Stock of the Company as of the Effective Date, shall agree
in writing, in a form satisfactory to the Underwriter, not to publicly sell any
of such Common Stock for a period of six (6) months from the Effective Date or
any longer period required by any state, without the prior written consent of
the Underwriter. There shall be no restrictions on any warrants held by
officers, directors or five percent (5%) shareholders of the Company.
(l) The Company will use its best efforts to obtain, on or
before the Closing Date, key person life insurance on the life of Mr. Richard
Parlontieri, in an amount of not less than $___________, and will use its best
efforts to maintain such insurance.
(m) On the Effective Date and for a period of five years
thereafter, the Company's Board of Directors shall consist of a minimum of five
(5) persons, two (2) of whom shall be independent and not otherwise affiliated
with the Company or associated with any of the Company's affiliates.
(n) On the Closing Date, the Company shall become a reporting
company under Section 12(g) of the 1934 Act and maintain such registration. The
Company shall also use its best efforts to procure the listing of the Shares
being offered on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") and maintain such listing.
(o) Within a reasonable period after the Closing Date, the
Company shall, at its own expense, undertake the listing of the Company's
securities in the appropriate recognized securities manual or manuals published
by Moody's Investor Services, Inc. and/or Standard & Poor's Corporation and such
other manuals as the Underwriter may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to maintain such listing for a period of not less than five years.
(p) The Company and each of its officers and directors
represent that it or he has not taken and agree that it or he will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Shares, or to facilitate the sale or resale of
the Shares.
(q) Prior to the Effective Date, the Company will have entered
into three (3) year employment contracts with Mr. Richard Parlontieri and Mr.
Louis J. Douglass, III.
(r) Prior to the Closing Date, the Company will not issue,
directly or indirectly, without your prior consent, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering of the Shares.
(s) The Company shall continue to employ the services of a
firm of independent certified public accountants acceptable to the Underwriter
in connection with the preparation of the
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<PAGE> 11
financial statements to be included in any registration statement or similar
disclosure document, to be filed by the Company hereunder, or any amendment or
supplement thereto.
(t) Within a reasonable period after the Closing Date, the
Underwriter shall prepare and publish, at the cost to the Company, two (2)
"tombstone" advertisements of at least 5 X 5 inches in publications to be
designated by the Underwriter.
(u) Following the Effective Date, the Company shall, at its
sole cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Underwriter and the Company may reasonably agree.
(v) For a period of one year from the date of this Agreement,
the Company will provide the Underwriter with a right of first refusal to serve
as a managing underwriter on any public or private financing (debt or equity),
or act as an advisor on any merger, business combination, recapitalization or
sale of some or all of the equity or assets of the Company (collectively, the
"future services"). In the event the Underwriter is engaged by the Company to
provide such future services, the Underwriter will be compensated as is
reasonable and customary within the industry.
7. Conditions of Underwriter's Obligation. The obligations
of the Underwriter to act as agent for the Company are subject to the accuracy
(as of the date hereof, and as of the Closing Date) of and compliance with the
representations and warranties of the Company herein, to the accuracy of
statements of officers of the Company made pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder, and to the
following conditions:
(a) (i) The Registration Statement shall have become effective
not later than 5:00 p.m., Eastern time, on the date of this Agreement, or at
such later time or on such later date as you may agree to in writing; (ii) at or
prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the Commission;
(iii) no stop order suspending the effectiveness of the qualification or
registration of the shares under the securities or "blue sky" laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall be threatened or to the knowledge of the Company contemplated by the
authorities of any such jurisdiction or shall have been issued and in effect;
(iv) any request for additional information on the part of the Commission or any
such authorities shall have been complied with to the satisfaction of the
Commission and any such authorities, and to the satisfaction of counsel to the
Underwriter; and (v) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Underwriter and the Underwriter did not
object thereto.
(b) At the Closing Date, since the respective dates as of
which information is presented in the Registration Statement and the Prospectus,
(i) there shall not have been any change in the capital stock of the Company or
any material change in the long-term debt of the Company except as set forth in
or contemplated by the Registration Statement, (ii) there shall not have been
any material adverse change in the general affairs, management, financial
position or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Registration Statement or Prospectus and (iii)
the Company shall not have
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<PAGE> 12
sustained any material interference with its business or properties from fire,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or any court or legislative or other governmental action,
order or decree, which is not set forth in the Registration Statement or
Prospectus, if in the judgment of the Underwriter any such development referred
to in clauses (i), (ii) or (iii) makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the Underwriter at the public
offering price.
(c) Since the respective dates as of which information is
presented in the Registration Statement and the Prospectus, there shall have
been no litigation instituted against the Company or any of its officers or
directors, and since such dates there shall be no proceeding instituted or
threatened against the Company or any of its officers or directors, before or by
any federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the business, material properties, financial condition or
results or operations of the Company.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with.
(e) At the Closing Date, you shall have received the opinion,
dated as of the Closing Date, from Nelson Mullins Riley & Scarborough, L.L.P.,
counsel for the Company, in form and substance satisfactory to counsel for the
Underwriter, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority
to own is properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
other jurisdiction in which the ownership or leasing of its properties
or conduct of its business requires such qualification;
(ii) to the best knowledge of such counsel; (a) the Company
has obtained, or is in the process of obtaining, all licenses, permits
and other governmental authorizations necessary to the conduct of its
business as described in the Prospectus; (b) such licenses, permits and
other governmental authorizations obtained are in full force and
effect; and (c) the Company is in all material respects complying
therewith;
(iii) the authorized capitalization of the Company as of
______________ is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding stock requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company have not been issued
in violation of the preemptive rights of any shareholder and the
shareholders of the Company do not have any preemptive rights or other
rights to subscribe for or to purchase, nor are there any restrictions
upon the voting or transfer of any of the Common Stock except as
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<PAGE> 13
disclosed in the Prospectus; the Common Stock conforms to the
description thereof contained in the Prospectus; the Shares have been
duly authorized and, when issued, delivered and paid for, will be duly
and validly issued, fully paid, non-assessable, free of preemptive
rights and no personal liability will attach to the ownership thereof;
all prior sales by the Company of the Company's securities have been
made in compliance with or under an exemption from registration under
the Act and applicable state securities laws; and to the best of such
counsel's knowledge, neither the filing of the Registration Statement
nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any registration rights or other rights, other
than those which have been waived or satisfied for or relating to the
registration of any shares of Common Stock;
(iv) this Agreement and the Escrow Agreement have been duly
and validly authorized, executed and delivered by the Company and,
assuming the due authorization, execution and delivery of this
Agreement by the Underwriter, are the valid and legally binding
obligations of the Company, except no opinion is expressed as to the
enforceability of the indemnity provisions or the contribution
provisions contained in this Agreement;
(v) the certificates evidencing the shares of Common Stock
are in valid and proper legal form;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could
materially adversely affect the business, property, financial condition
or operations of the Company; or which question the validity of the
Shares, this Agreement, or the Escrow Agreement or of any action taken
or to be taken by the Company pursuant to this Agreement or the Escrow
Agreement; and no such proceedings are known to such counsel to be
contemplated against the Company; there are no governmental proceedings
or regulations required to be described or referred to in the
Registration Statement which are not so described or referred to;
(vii) the Company is not in violation of or default under,
nor will the execution and delivery of this Agreement or the Escrow
Agreement, and the incurrence of the obligations herein and therein set
forth and the consummation of the transactions herein or therein
contemplated, result in a violation of, or constitute a default under
the certificate of incorporation or by-laws, in the performance or
observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound
or in violation of any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality
or court, domestic or foreign;
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<PAGE> 14
(viii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(ix) such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has come to the
attention of such counsel to cause such counsel to have reason to
believe that the Registration Statement or any amendment thereto at the
time it became effective contained any untrue statement of a material
fact required to be stated therein or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus or any supplement thereto
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein, in light
of the circumstances under which they are made, not misleading (except,
in the case of both the Registration Statement and any amendment
thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need
express no opinion);
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(xi) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Shares by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, other
than registrations or qualifications of the Shares under applicable
state or foreign securities or Blue Sky laws and registration under the
Act; and
(xii) the statements in the Registration Statement under the
captions "Proposed Business," "Use of Proceeds," "Management,"
"Supervision and Regulation," and "Description of Capital Stock of the
Company" have been reviewed by such counsel and insofar as they refer
to descriptions of agreements, statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respect.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the State
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<PAGE> 15
of Georgia upon opinions of counsel satisfactory to you, in which case the
opinion shall state that they have no reason to believe that you and they are
not entitled to so rely.
(f) The Underwriter shall have received on each Closing Date,
a certificate dated as of each Closing Date, signed by the President, Treasurer,
Secretary and such other officers of the Company as the Underwriter may request,
certifying that:
(i) No Order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the Shares
in effect and no proceedings for such purpose are pending or are, to
their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or
threatened against the Company of a character required to be disclosed
in the Registration Statement which is not disclosed therein; they do
not know of any contracts which are required to be summarized; and they
do not know of any material contracts required to be filed as exhibits
to the Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any amendment
or supplement to either of the foregoing contains an untrue statement
of any material fact or omits to state any material fact required to be
stated therein or necessary to make the statement therein not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus and except as so reflected or contemplated since such date,
there has not been any material transaction entered into by the
Company;
(v) The representations and warranties set forth in this
Agreement are true and correct and the Company has complied with all of
its agreements herein contained;
(vi) The Company is not delinquent in the filing of any
federal, state and municipal tax return or the payment of any federal,
state or municipal taxes; they know of no proposed redetermination or
re-assessment of taxes, adverse to the Company, and the Company has
paid or provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Escrow Agreement, the consummation
of the transactions therein contemplated, and the fulfillment of the
terms thereof, will not result in a breach by the Company of any terms
of, or constitute a default under, its Articles of
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<PAGE> 16
Incorporation or By-Laws, any indenture, mortgage, lease, deed or
trust, bank loan or credit agreement or any other agreement or
undertaking of the Company including, by way of specification but not
by way of limitation, any agreement or instrument to which the Company
is now a party or pursuant to which the Company has acquired any right
and/or obligations by succession or otherwise;
(ix) The financial statements and schedules field with and
as part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted principles of accounting applied on a consistent
basis throughout the periods involved. Since the respective dates of
such financial statements, there have been no material adverse change
in the condition or general affairs of the Company, financial or
otherwise, other than as referred to in the Prospectus; and
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, the Company has not prior
to the Closing Date, either (a) issued any securities or incurred any
material liability or obligation, direct or contingent, for borrowed
money, or (b) entered into any material transaction other than in the
ordinary course of business. The Company has not declared, paid or made
any dividend or distribution of any kind on its capital stock.
(xi) They have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in
the Company, and all information contained therein is true and
accurate; and
(xii) During the past five years they have not been:
(a) Subject of a petition under the Federal
Bankruptcy Laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(b) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(c) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
either of them from, or otherwise limiting, any of the
following activities:
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(1) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(2) engaging in any type of business
practice; or
(3) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal Commodity
laws.
(d) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or
State authority barring, suspending or otherwise limiting for
more than sixty (60) days either of their right to engage in
any activity described in paragraph (3)(i) above, or be
associated with persons engaged in any such activity;
(e) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(f) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any Federal Commodities Law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriter shall have received from Bricker & Melton,
P.A., independent auditors to the Company, two certificates or letters, one
dated and delivered on the Effective Date and one dated and delivered on the
Closing Date, in form and substance satisfactory to the Underwriter, stating
that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) the financial statements and the schedules included in
the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable requirements of the Act, the Rules and Regulations and
instructions of the Commission with respect to registration statements
on Form SB-2;
(iii) on the basis of inquiries and procedures conducted by
them (not constituting an
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<PAGE> 18
examination in accordance with generally accepted auditing standards),
including a reading of the latest available unaudited interim financial
statements or other financial information of the Company (with an
indication of the date of the latest available unaudited interim
financial statements), inquiries of officers of the Company who have
responsibility for financial and accounting matters, review of minutes
of all meetings of the shareholders and the Board of Directors of the
Company and other specified inquiries and procedures, nothing has come
to their attention as a result of the foregoing inquiries and
procedures that causes them to believe that:
(a) during the period from (and including) the date of the
financial statements in the Registration Statement and the Prospectus
to a specified date not more than five days prior to the date of such
letters, there has been any change in the Common Stock, long-term debt
or other securities of the Company (except as specifically contemplated
in the Registration Statement and Prospectus) or any material decreases
in net current assets, net assets, shareholder's equity, working
capital or in any other item appearing in the Company's financial
statements as to which the Underwriter may request advice, in each case
as compared with amounts shown in the balance sheets as of the date of
the financial statement in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or will occur;
(b) during the period from (and including) the date of the
financial statements in the Registration Statement and the Prospectus
to such specified date there was any material decrease in revenues or
in the total or per share amounts of income or loss before
extraordinary items or net income or loss, or any other material change
in such other items appearing in the Company's financial statements as
to which the Underwriter may request advice, in each case as compared
with the fiscal period ended as of the date of the financial statement
in the Prospectus, except in each case for increases, changes or
decreases which the Prospectus discloses have occurred or will occur;
(c) the unaudited interim financial statements of the Company
appearing in the Registration Statement and the Prospectus (if any) do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and regulations or are
not fairly presented in conformity with generally accepted accounting
principles and practices on a basis substantially consistent with the
audited financial statements included in the Registration Statements or
the Prospectus.
Such letters shall also set forth such other information as
may be requested by counsel for the Underwriter. Any changes, increases or
decreases in the items set forth in such letters which, in the judgment of the
Underwriter, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the Underwriter
hereunder.
(h) If any of the conditions herein provided for in this
Section shall not have been fulfilled as of the date indicated, this Agreement
and all obligations of the Underwriter under this Agreement may be canceled at,
or at any time prior to, the Closing Date by the Underwriter notifying the
Company of such cancellation in writing or by telegram at or prior to the
Closing Date. Any such cancellation shall be without liability of the
Underwriter to the Company.
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8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Underwriter
and each person, if any, who controls the Underwriter within the meaning of the
Act against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
the Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (i) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company and filed in any state or other jurisdiction in order
to qualify any or all of the Shares under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereto or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding the
foregoing, the Company shall have no liability under this Section if such untrue
statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons alleging
the liability upon which indemnification is being sought. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company, each
of its directors, each nominee (if any) for director named in the Prospectus,
each of its officers who have signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in the
preparation thereof. Notwithstanding the foregoing, the Underwriter shall have
no liability under this Section if such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus and the Prospectus is
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not delivered to the person or persons alleging the liability upon which
indemnification is being sought through no fault of the Underwriter. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Underwriter, it is advisable for the Underwriter or controlling persons to be
represented by separate counsel (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the Underwriter
or such controlling person, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys for such Underwriter
and controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnifying party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnifying party.
9. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriter makes claim
for indemnification pursuant to Section 8 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that the express provisions of Section 8 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of the
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damage or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees) in either such
case (after contribution from others) in such proportions that the Underwriter
is responsible in the aggregate
20
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for that portion of such losses, claims, damages or liabilities represented by
the percentage that the underwriting commission per Share appearing on the cover
page of the Prospectus bears to the public offering price appearing thereon, and
the Company shall be responsible for the remaining portion, provided, however,
that if such allocation is not permitted by applicable law then the relative
fault of the Company and the Underwriter and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in such
damages and other relevant equitable considerations shall also be considered.
The relative fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or the omission to
state a material fact, such statement or omission relates to information
supplied by the Company, or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section were to be determined by
pro rata or per capita allocation of the aggregate damages (even if the
Underwriter and its controlling persons in the aggregate were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the Act,
and the word "Company" includes any officer, director, or person who controls
the Company within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company, its officers, directors and controlling persons
to the full extent permitted by law. This foregoing contribution agreement shall
in no way affect the contribution liabilities of any persons having liability
under Section 11 of the Act other than the Company and the Underwriter. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
10. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Shares by the Company is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company
including but not limited to the fees and expenses of counsel to the Company and
of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented; the fee of the National Association of Securities Dealers, Inc.
("NASD") in connection with the filing required by the NASD relating to the
offering of the Shares contemplated hereby; all state filing fees, expenses and
disbursements and legal fees to counsel to the Company who shall serve as Blue
Sky counsel to the Company in connection with the qualification of the Shares
under the state securities or blue sky laws in up to twelve jurisdictions, which
the Underwriter shall designate; the cost of printing and furnishing to the
Underwriter copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, this Agreement, Selected Dealers Agreement and the Blue Sky
Memorandum; the cost of printing the certificates evidencing the Shares; the
cost of preparing and delivering to the Underwriter and its counsel bound
volumes containing copies of all documents and appropriate correspondence filed
with
21
<PAGE> 22
or received from the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc., and all closing documents; and the fees
and disbursements of the transfer agent for the Company's securities. The
Company shall pay any and all taxes (including any transfer, franchise, capital
stock or other tax imposed by any jurisdiction) on sales hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus.
(b) In addition to the foregoing expenses, the Company shall,
at the Closing Date, if at least 550,000 Shares are sold, pay to the
Underwriter, an accountable expense allowance equal to $65,000 of which $10,000
has been paid to date, and which expense allowance the Company shall reimburse
the Underwriter upon receipt of reasonable documentation of such expense from
the Underwriter.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriter against any losses,
claims, damages or liabilities, joint or several which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees, to which the Underwriter may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason of
such person's or entity's influence or prior contact with the indemnifying
party.
11. Termination.
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(a) This Agreement, except for Sections 8, 9, 10, 12, 13, 14,
15, 16, hereof, may be terminated at any time prior to the Closing Date, by you
if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriter for the sale of the Shares by reason of (i)
the Company having sustained a material loss, whether or not insured, by reason
of fire, earthquake, flood, accident or other a calamity, or from any labor
dispute or court or government action, order or decree, (ii) trading in
securities on the New York Stock Exchange or the American Stock Exchange having
been suspended or limited, (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof), (iv) a banking moratorium having been declared by federal or Georgia
State authorities, (v) an outbreak of major international hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which has a material impact on the
business, financial condition or financial statements of the Company or the
market for securities in general, (vii) conditions in the over-the-counter
market which cause the Underwriter to believe that no favorable public market
exists for the sale of the Shares, (viii) any material adverse change having
occurred, since the respective dates as of which information is given in the
Registration Statement and Prospectus, in the earnings, business prospects or
general condition of the Company, financial or otherwise, whether or not arising
in the ordinary course of business, or (ix) the Company shall not have complied
with any term, condition or provisions on their part to be performed, complied
with or fulfilled (including but not limited to those set forth in this
Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
12. Representations, Warranties and Agreements to Survive
Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company or its Principal Stockholders, where
appropriate, and the Underwriter set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of the Underwriter, the Company or any of its officers or directors or
any controlling person and will survive delivery of and payment for the Shares
and the termination of this Agreement.
13. Notice. All communications hereunder will be in writing
and, except as otherwise expressly provided herein, if sent to the Underwriter,
will be mailed, delivered or telegraphed and confirmed to them at Banc Stock
Financial Services, Inc., 1105 Schrock Road, Columbus, Ohio 43229, with a copy
sent to Carlile Patchen & Murphy LLP, 366 East Broad Street, Columbus, Ohio
43215, or if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 100 Galleria Parkway, Suite 600, Atlanta, Georgia 30339, with
a copy sent to Nelson Mullins Reilly & Scarborough, L.L.P. at 999 Peachtree
Street, NE, Suite 1400, Atlanta, Georgia 30309.
14. Parties in Interest. This Agreement herein set forth is
made solely for the benefit of the Underwriter, the Company and, to the extent
expressed, any person controlling the Company or the Underwriter, and directors
of the Company, nominees for directors (if any) named in the Prospectus, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors, assigns and no other person shall acquire
or have any right under or by virtue
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<PAGE> 24
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from the Underwriter of the Shares.
15. Applicable Law. This Agreement will be governed by, and
construed in accordance with, the Laws of the State of Ohio applicable to
agreement made and to be entirely performed within Ohio.
16. Entire Agreement. This Agreement constitutes the entire
agreement of the parties, and supersedes all prior agreement, understanding,
negotiations and discussions, whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
SOUTHEAST COMMERCE HOLDING COMPANY
By:
-------------------------------------
Richard R. Parlontieri, Chairman
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
BANC STOCK FINANCIAL SERVICES, INC.
By:
-------------------------------------
Anthony J. Reilly, President
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EXHIBIT 10.1
SOUTHEAST COMMERCE HOLDING COMPANY
100 GALLERIA PARKWAY, SUITE 400
ATLANTA, GEORGIA 30339
Louis J. Douglass, III
4931 Mill Stream Court
Dunwoody, Georgia 30338
Dear Lou:
We are pleased to propose this LETTER OF AGREEMENT (this "Agreement")
dated as of November 18, 1997, to be entered into between Southeast Commerce
Holding Company, a Georgia corporation (the "Employer" or the "Company") which
is the proposed thrift holding company for Commerce Bank (Proposed), a proposed
thrift (the "Thrift"), and Louis J. Douglass, III, an individual resident of
Georgia (the "Executive").
The Employer is in the process of organizing the Thrift, and the
Executive has agreed to serve as President and Chief Executive Officer of the
Thrift. Upon organization of the Thrift, the Employer and the Executive
contemplate that this Agreement will be assigned by the Employer to the Thrift
and that the Thrift will assume the duties of the Company hereunder (except
pursuant to Section 3). Following such assignment, the term "Employer" as used
herein from time to time shall refer to the Thrift.
The Employer recognizes that the Executive's contribution to the growth
and success of the Thrift during its organization and initial years of
operations will be a significant factor in the success of the Thrift. The
Employer desires to provide for the employment of the Executive in a manner
which will reinforce and encourage the dedication of the Executive to the Thrift
and promote the best interests of the Thrift and its shareholders. The Executive
is willing to serve the Employer (and, after assignment of this Agreement, the
Thrift) on the terms and conditions herein provided. Certain terms used in this
Agreement are defined in Section 14 hereof.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment. The Employer shall employ the Executive, and the
Executive shall serve the Employer, as President and Chief Executive Officer of
the Thrift upon the terms and conditions set forth herein. The Executive shall
have such authority and responsibilities consistent with his position as are set
forth in the Company's or the Thrift's Bylaws or assigned by the Company's or
the Thrift's Board of Directors (the "Board") from time to time. The Executive
shall devote his full business time, attention, skill and efforts to the
performance of his duties hereunder, except during periods of illness or periods
of vacation and leaves of absence consistent with Thrift policy. The Executive
may devote reasonable periods to service as a director or advisor to other
organizations, to charitable and community activities, and to managing his
personal investments, provided that such activities do not materially interfere
with the performance of his duties hereunder and are not in conflict or
competitive with, or adverse to, the interests of the Company or the Thrift.
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2. Term. Unless earlier terminated as provided herein, the Executive's
employment under this Agreement shall commence on the date hereof and be for a
term (the "Term") of three years, with an annual review of Executive's
performance and written approval by the Board for renewal, which may be extended
for additional time periods by mutual agreement of the Executive and the
Employer.
3. Compensation and Benefits.
(a) The Employer shall pay the Executive a salary at a rate of not less
than $110,000 per annum in accordance with the salary payment practices of the
Employer. The Executive shall also receive a $15,000 cash bonus on the opening
date of the Thrift.
(b) The Executive shall participate in any retirement, welfare,
deferred compensation, life and health insurance, and other benefit plans or
programs of the Employer now or hereafter applicable to the Executive or
applicable generally to employees of the Employer.
(c) On the date of the closing of the stock offering for the initial
capitalization of the Thrift, or as soon thereafter as an appropriate stock
option plan is adopted by the Board, the Company shall grant to the Executive an
option to purchase 10,000 shares of Common Stock. The option will be represented
by a separate stock option agreement which will provide that the option will
vest over a three-year period (4,000 shares on the first anniversary of the
opening date of the Thrift and 3,000 shares on the second and third anniversary,
so long as the Executive is still employed by the Employer on each anniversary).
(c) However, the option agreement will also provide that if the Executive's
employment is terminated for any reason other than for Cause, then the options
will vest in full immediately upon such termination.
(d) Beginning on the date of this Agreement, the Company shall provide
the Executive with a monthly automobile allowance not to exceed $600 per month.
In addition, the Employer shall pay the dues pertaining to the Executive's
membership in an area country club in an amount to be agreed upon by the
parties.
(e) Beginning on the date of this Agreement, the Employer shall
reimburse the Executive for reasonable travel and other expenses related to the
Executive's duties which are incurred and accounted for in accordance with the
normal practices of the Employer.
4. Termination.
(a) Notwithstanding the Term of this Agreement, the Employer has the
right to terminate this Agreement at any time in accordance with this Section 4.
(b) If the Employer terminates the Executive's employment under this
Agreement prior to the end of the Term for any reason other than Cause, the
Employer shall pay to the Executive severance compensation in an amount equal to
100% of his then current monthly base salary each month for twelve months from
the date of termination, plus any bonus earned or accrued through the date of
termination. The Employer may terminate this Agreement at any time, but any
termination by the Employer other than termination for Cause shall not prejudice
the Executive's right to compensation or other benefits under this Agreement.
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<PAGE> 3
(c) If the Executive's employment is terminated because of the
Executive's death, the Executive's estate shall receive any sums due him as base
salary and/or reimbursement of expenses through the end of the month during
which death occurred, plus any bonus earned or accrued under the through the
date of death.
(d) If the Executive's employment is terminated for Cause, or if the
Executive resigns, the Executive shall receive any sums due him as base salary
and/or reimbursement of expenses through the date of such termination. The
Executive shall have no right to receive compensation or other benefits for any
period after termination for Cause. For purposes of this Agreement, termination
for Cause shall include termination because of the Executive's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement.
(e) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Employer's affairs by a notice served under
section 8(e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)), the Employer's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Employer may in its discretion (i)
pay the Executive all or part of the compensation withheld while the obligations
under this Agreement were suspended and (ii) reinstate (in whole or in part) any
of such obligations which were suspended.
(f) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Employer's affairs by an order issued under
section 8 (e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(4) or (g)(1)), all obligations of the Executive under this Agreement shall
terminate as of the effective date of the order, but any vested rights of the
parties hereto shall not be affected.
(g) If the Employer is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (4)(g) shall not affect
any vested rights of the parties hereto.
(h) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary of the
continued operation of the Employer, in the following cases:
(i) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to
or on behalf of the Employer under the authority contained in 13(c) of
the Federal Deposit Insurance Act; or
(ii) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to
resolve problems related to operation of the Employer or when the
Employer is determined by the Director to be in an unsafe or unsound
condition.
(i) With the exceptions of the provisions of this Section 4, and the
express terms of any benefit plan under which the Executive is a participant, it
is agreed that, upon termination of the
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Executive's employment, the Employer shall have no obligation to the Executive
for, and the Executive waives and relinquishes, any further compensation or
benefits (exclusive of COBRA benefits). At the time of termination of
employment, the Employer and the Executive shall enter into a mutually
satisfactory form of release acknowledging such remaining obligations and
discharging both parties, as well as the Employer's officers, directors and
employees with respect to their actions for or on behalf of the Employer, from
any other claims or obligations arising out of or in connection with the
Executive's employment by the Employer, including the circumstances of such
termination.
(j) In the event that the Executive's employment is terminated for any
reason, the Executive shall (and does hereby) tender his resignation as a
director of the Employer and effective as of the date of termination.
(k) Any payments made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
5. Protection of Trade Secrets. The Executive agrees to maintain in
strict confidence and, except as necessary to perform his duties for the
Employer, the Executive agrees not to use or disclose any Trade Secrets of the
Employer during or after his employment. As provided by Georgia statutes, "Trade
Secret" means information, including a formula, pattern, compilation, program,
device, method, technique, process, drawing, cost data or customer list, that:
(i) derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
6. Protection of Other Confidential Information. In addition, the
Executive agrees to maintain in strict confidence and, except as necessary to
perform his duties for the Employer, not to use or disclose any Confidential
Business Information of the Employer during his employment and for a period of
24 months following termination of the Executive's employment. "Confidential
Business Information" shall mean any internal, non-public information (other
than Trade Secrets already addressed above) concerning the Employer's financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans; marketing
plans and methods; training, educational and administrative manuals; customer
and supplier information and purchase histories; and employee lists. The
provisions of Sections 5 and 6 above shall also apply to protect Trade Secrets
and Confidential Business Information of third parties provided to the Employer
under an obligation of secrecy.
7. Return of Materials. The Executive shall surrender to the Employer,
promptly upon its request and in any event upon termination of the Executive's
employment, all media, documents, notebooks, computer programs, handbooks, data
files, models, samples, price lists, drawings, customer lists, prospect data, or
other material of any nature whatsoever (in tangible or electronic form) in the
Executive's possession or control, including all copies thereof, relating to the
Employer, its business, or its customers. Upon the request of the Employer,
employee shall certify in writing compliance with the foregoing requirement.
4
<PAGE> 5
8. Restrictive Covenants.
(a) No Solicitation of Customers. During the Executive's employment
with the Employer and for a period of 12 months thereafter, the Executive shall
not (except on behalf of or with the prior written consent of the Employer),
either directly or indirectly, on the Executive's own behalf or in the service
or on behalf of others, (A) solicit, divert, or appropriate to or for a
Competing Business, or (B) attempt to solicit, divert, or appropriate to or for
a Competing Business, any person or entity that was a customer of the Employer
or any of its Affiliates on the date of termination and is located in the
Territory and with whom the Executive has had material contact.
(b) No Recruitment of Personnel. During the Executive's employment with
the Employer and for a period of 12 months thereafter, the Executive shall not,
either directly or indirectly, on the Executive's own behalf or in the service
or on behalf of others, (A) solicit, divert, or hire away, or (B) attempt to
solicit, divert, or hire away, to any Competing Business located in the
Territory, any employee of or consultant to the Employer or any of its
Affiliates engaged or experienced in the Business, regardless of whether the
employee or consultant is full-time or temporary, the employment or engagement
is pursuant to written agreement, or the employment is for a determined period
or is at will.
(c) Non-Competition Agreement. During the Executive's employment with
the Employer and for a period of 12 months thereafter, the Executive shall not
(without the prior written consent of the Employer) compete with the Employer or
any of its Affiliates by, directly or indirectly, forming, serving as an
organizer, director or officer of, or consultant to, or acquiring or maintaining
more than a 1% passive investment in, a depository financial institution or
holding company therefor if such depository institution or holding company has
one or more offices or branches located in the Territory. Notwithstanding the
foregoing, the Executive may serve as an officer of or consultant to a
depository institution or holding company therefor even though such institution
operates one or more offices or branches in the Territory, if the Executive's
employment does not directly involve, in whole or in part, the depository
financial institution's or holding company's operations in the Territory.
9. Independent Provisions. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision or clause of this Agreement, or portion thereof, shall be held by any
court or other tribunal of competent jurisdiction to be illegal, void, or
unenforceable in such jurisdiction, the remainder of such provision shall not be
thereby affected and shall be given full effect, without regard to the invalid
portion. It is the intention of the parties that, if any court construes any
provision or clause of this Agreement, or any portion thereof, to be illegal,
void, or unenforceable because of the duration of such provision or the area or
matter covered thereby, such court shall reduce the duration, area, or matter of
such provision, and, in its reduced form, such provision shall then be
enforceable and shall be enforced. The Executive and the Employer hereby agree
that they will negotiate in good faith to amend this Agreement from time to time
to modify the terms of Sections 8(a), 8(b), and 8(c), the definition of the term
"Territory," and the definition of the term "Business," to reflect changes in
the Employer's business and affairs so that the scope of the limitations placed
on the Executive's activities by Section 8 accomplishes the parties' intent in
relation to the then current facts and circumstances. Any such amendment shall
be effective only when completed in writing and signed by the Executive and the
Employer.
5
<PAGE> 6
10. Successors; Binding Agreement. The rights and obligations of this
Agreement shall bind and inure to the benefit of the surviving corporation in
any merger or consolidation in which the Employer is a party, or any assignee of
all or substantially all of the Employer's business and properties. The
Executive's rights and obligations under this Agreement may not be assigned by
him, except that his right to receive accrued but unpaid compensation,
unreimbursed expenses and other rights, if any, provided under this Agreement
which survive termination of this Agreement shall pass after death to the
personal representatives of his estate.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided, however, that all
notices to the Employer shall be directed to the attention of the Employer with
a copy to the Secretary of the Employer. All notices and communications shall be
deemed to have been received on the date of delivery thereof.
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in State of Georgia.
13. Enforcement. The Executive agrees that in the event of any breach
or threatened breach by the Executive of any covenant contained in Section 8(a),
8(b), or 8(c) hereof, the resulting injuries to the Employer would be difficult
or impossible to estimate accurately, even though irreparable injury or damages
would certainly result. Accordingly, an award of legal damages, if without other
relief, would be inadequate to protect the Employer. The Executive, therefore,
agrees that in the event of any such breach, the Employer shall be entitled to
obtain from a court of competent jurisdiction an injunction to restrain the
breach or anticipated breach of any such covenant, and to obtain any other
available legal, equitable, statutory, or contractual relief. Should the
Employer have cause to seek such relief, no bond shall be required from the
Employer, and the Executive shall pay all attorney's fees and court costs which
the Employer may incur to the extent the Employer prevails in its enforcement
action.
14. Certain Definitions.
(a) "Affiliate" shall mean any business entity controlled by,
controlling or under common control with the Employer.
(b) "Business" shall mean the operation of a depository financial
institution, including, without limitation, the solicitation and acceptance of
deposits of money and commercial paper, the solicitation and funding of loans
and the provision of other banking services, and any other related business
engaged in by the Employer or any of its Affiliates as of the date of
termination.
(c) "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
(d) "Territory" shall mean a radius of ten miles from (i) the main
office of the Employer or (ii) any branch office of the Employer.
6
<PAGE> 7
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof. Failure of the Employer to enforce
any of the provisions of this Agreement or any rights with respect thereto shall
in no way be considered to be a waiver of such provisions or rights, or in any
way affect the validity of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. No Conflict with Laws. In the event there are any discrepancies
herein with any federal law or regulation, the federal law or regulation shall
control.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers thereunto duly
authorized, and the Executive has signed and sealed this Agreement, effective as
of the date first above written.
SOUTHEAST COMMERCE HOLDING COMPANY
ATTEST:
By: /s/ Tammy A. Boleman By: /s/ Richard A. Parlontieri
--------------------------- ----------------------------------------
Name: Tammy A. Boleman Name: Richard A. Parlontieri
Title: Title: Chief Executive Officer
(CORPORATE SEAL)
EXECUTIVE
By: /s/ Louis J. Douglass
-------------------------------------
Name: Louis J. Douglass, III
7
<PAGE> 1
EXHIBIT 10.4
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into as of the 5th
day of March, 1998, by and among Southeast Commerce Holding Company, a Georgia
corporation (the "Company"), Banc Stock Financial Services, Inc. (the "Sales
Agent"), and The Bankers Bank (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to offer and sell (the "Offering") up to
15,000,000 shares of Common Stock, par value $.01 per share (the "Shares"), to
investors at $10.00 per Share pursuant to a registered public offering;
WHEREAS, the Sales Agent intends to sell the Shares as the Company's
agent on a best efforts, all-or-none basis for 550,000 shares and on a best
efforts basis for the remaining Shares; and
WHEREAS, the Company desires to establish an escrow for funds forwarded
by subscribers for the Shares, and the Escrow Agent is willing to serve as
Escrow Agent upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEPOSIT WITH ESCROW AGENT.
(a) The Escrow Agent agrees that it will from time to time accept, in
its capacity as escrow agent, subscription funds for the Shares (the "Escrowed
Funds") received by it from subscribers, the Sales Agent, or the Company when it
has received checks from subscribers. All checks shall be made payable to the
Escrow Agent. If any check does not clear normal banking channels in due course,
the Escrow Agent will promptly notify the Company and the Sales Agent. Any check
which does not clear normal banking channels and is returned by the drawer's
bank to Escrow Agent will be promptly turned over to the Sales Agent, along with
all other subscription documents relating to such check. Any check received that
is made payable to a party other than the Escrow Agent shall be returned to the
Sales Agent for return to the proper party. The Company in its sole and absolute
discretion may reject any subscription for Shares for any reason and upon such
rejection it shall notify and instruct the Escrow Agent in writing to return the
Escrowed Funds by check made payable to the subscriber. If the Company rejects
or cancels any subscription for any reason the Company will retain any interest
earned on the Escrowed Funds to help defray organizational costs.
(b) Subscription agreements for the Shares shall be reviewed for
accuracy by the Sales Agent and, immediately thereafter, the Sales Agent shall
deliver to the Escrow Agent the
<PAGE> 2
following information: (i) the name and address of the subscriber; (ii) the
number of Shares subscribed for by such subscriber; (iii) the subscription price
paid by such subscriber; (iv) the subscriber's tax identification number
certified by such subscriber; and (v) a copy of the subscription agreement.
2. INVESTMENT OF ESCROWED FUNDS. Upon collection of each check by the
Escrow Agent, the Escrow Agent shall invest the funds in deposit accounts or
short-term certificates of deposit which are fully insured by the Federal
Deposit Insurance Corporation or another agency of the United States government,
short-term securities issued or fully guaranteed by the United States
government, federal funds, or such other investments as the Escrow Agent, the
Sales Agent, and the Company shall agree. The Company shall provide the Escrow
Agent with instructions from time to time concerning in which of the specific
investment instruments described above the Escrowed Funds shall be invested, and
the Escrow Agent shall adhere to such instructions. Unless and until otherwise
instructed by the Company, the Escrow Agent shall by means of a "sweep" or other
automatic investment program invest the Escrowed Funds in blocks of $10,000 in
federal funds. Interest and other earnings shall start accruing on such funds as
soon as such funds would be deemed to be available for access under applicable
banking laws and pursuant to the Escrow Agent's own banking policies.
3. DISTRIBUTION OF ESCROWED FUNDS. The Escrow Agent shall distribute
the Escrowed Funds in the amounts, at the times, and upon the conditions
hereinafter set forth in this Agreement.
(a) If at any time on or prior to the expiration date of the offering
as described in the prospectus relating to the offering, (the "Closing Date"),
(i) the Escrow Agent has certified to the Company and the Sales Agent in writing
that the Escrow Agent has received at least $5,500,000 in Escrowed Funds, and
(ii) the Escrow Agent has received a certificate from the President or another
authorized representative of the Company that all other conditions to the
release of funds as described in the Company's Registration Statement filed with
the Securities and Exchange Commission pertaining to the public offering have
been met, then the Escrow Agent shall deliver the Escrowed Funds to the Company
to the extent such Escrowed Funds are collected funds. If any portion of the
Escrowed Funds are not collected funds, then the Escrow Agent shall notify the
Company and the Sales Agent of such facts and shall distribute such funds to the
Company only after such funds become collected funds. For purposes of this
Agreement, "collected funds" shall mean all funds received by the Escrow Agent
which have cleared normal banking channels. In all events, the Escrow Agent
shall deliver not less than $5,500,000 in collected funds to the Company, except
as provided in Paragraphs 3(b) and 3(c) hereof.
(b) In lieu of collected funds, the organizers of the Company may pay
for subscriptions by assigning to the Company any portion of any obligation of
the Company to repay any advances made by such organizers to the Company to fund
organizational or other expenses and delivering such assignment to the Escrow
Agent to be held hereunder.
(c) If the Escrowed Funds do not, on or prior to the Closing Date,
become deliverable
<PAGE> 3
to the Company based on failure to meet the conditions described in Paragraph
3(a), or if the Company terminates the offering at any time prior to the Closing
Date and delivers written notice to the Escrow Agent of such termination (the
"Termination Notice"), the Escrow Agent shall return the Escrowed Funds which
are collected funds as directed in writing by the Company and the Sales Agent to
the respective subscribers in amounts equal to the subscription amount paid by
each of them. All uncleared checks representing Escrowed Funds which are not
collected funds as of the Initial Closing Date shall be collected by the Escrow
Agent, and together with all related subscription documents thereof shall be
delivered to the Sales Agent by the Escrow Agent, unless the Escrow Agent is
otherwise specifically directed in writing by the Company and the Sales Agent.
The Company is aware and understands that, until it becomes entitled to receive
the Escrowed Funds as described in Paragraph 3(a), it is not entitled to any
Escrowed Funds and that no amounts deposited in the Escrow Account shall become
the property of the Company or any other entity or be subject to the debts of
the Company or any other entity.
4. DISTRIBUTION OF INTEREST. Any interest earned on the Escrowed
Funds shall be retained by the Company.
5. FEES OF ESCROW AGENT. The Company shall pay the Escrow Agent a fee
of $2,000 for its services hereunder. The escrow account will accrue a service
charge of $15.00 per month. In addition, a $20.00 per check fee will be charged
if the escrow account has to be refunded due to a failure to complete the
subscription. All of these fees are payable upon the release of the Escrowed
Funds, and the Escrow Agent is hereby authorized to deduct such fees from the
Escrowed Funds prior to any release thereof pursuant to Section 3 hereof.
6. LIABILITY OF ESCROW AGENT.
(a) In performing any of its duties under this Agreement, or upon the
claimed failure to perform its duties hereunder, the Escrow Agent shall not be
liable to anyone for any damages, losses or expenses which it may incur as a
result of the Escrow Agent so acting, or failing to act; provided, however, the
Escrow Agent shall be liable for damages arising out of its willful default or
misconduct or its gross negligence under this Agreement. Accordingly, the Escrow
Agent shall not incur any such liability with respect to (i) any action taken or
omitted to be taken in good faith upon advice of its counsel or counsel for the
Company which is given with respect to any questions relating to the duties and
responsibilities of the Escrow Agent hereunder; or (ii) any action taken or
omitted to be taken in reliance upon any document, including any written notice
or instructions provided for this Escrow Agreement, not only as to its due
execution and to the validity and effectiveness of its provisions but also as to
the truth and accuracy of any information contained therein, if the Escrow Agent
shall in good faith believe such document to be genuine, to have been signed or
presented by a proper person or persons, and to conform with the provisions of
this Agreement.
(b) The Company and the Sales Agent agree to indemnify and hold
harmless the Escrow Agent against any and all losses, claims, damages,
liabilities and expenses, including, without limitation, reasonable costs of
investigation and counsel fees and disbursements which
<PAGE> 4
may be imposed by the Escrow Agent or incurred by it in connection with its
acceptance of this appointment as Escrow Agent hereunder or the performance of
its duties hereunder, including, without limitation, any litigation arising from
this Escrow Agreement or involving the subject matter thereof; except, that if
the Escrow Agent shall be found guilty of willful misconduct or gross negligence
under this Agreement, then, in that event, the Escrow Agent shall bear all such
losses, claims, damages and expenses.
(c) If a dispute ensues between any of the parties hereto which, in the
opinion of the Escrow Agent, is sufficient to justify its doing so, the Escrow
Agent shall retain legal counsel of its choice as it reasonably may deem
necessary to advise it concerning its obligations hereunder and to represent it
in any litigation to which it may be a part by reason of this Agreement. The
Escrow Agent shall be entitled to tender into the registry or custody of any
court of competent jurisdiction all money or property in its hands under the
terms of this Agreement, and to file such legal proceedings as it deems
appropriate, and shall thereupon be discharged from all further duties under
this Agreement. Any such legal action may be brought in any such court as the
Escrow Agent shall determine to have jurisdiction thereof. In connection with
such dispute, the Company and the Sales Agent shall indemnify the Escrow Agent
against its court costs and reasonable attorney's fees incurred.
(d) The Escrow Agent may resign at any time upon giving 30 days written
notice to the Company and the Sales Agent. If a successor escrow agent is not
appointed by Company within 30 days after notice of resignation, the Escrow
Agent may petition any court of competent jurisdiction to name a successor
escrow agent and the Escrow Agent herein shall be fully relieved of all
liability under this Agreement to any and all parties upon the transfer of the
Escrowed Funds and all related documentation thereto, including appropriate
information to assist the successor escrow agent with the reporting of earnings
of the Escrowed Funds to the appropriate state and federal agencies in
accordance with the applicable state and federal income tax laws, to the
successor escrow agent designated by the Company appointed by the court.
7. APPOINTMENT OF SUCCESSOR. The Company and the Sales Agent may,
upon the delivery of 30 days written notice appointing a successor escrow agent
to the Escrow Agent, terminate the services of the Escrow Agent hereunder. In
the event of such termination, the Escrow Agent shall immediately deliver to the
successor escrow agent selected by the Company all documentation and Escrowed
Funds including interest earnings thereon in its possession, less any fees and
expenses due to the Escrow Agent or required to be paid by the Escrow Agent to a
third party pursuant to this Agreement.
8. NOTICE. All notices, requests, demands and other communications or
deliveries required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given three days after having been deposited
for mailing if sent by registered mail, or certified mail return receipt
requested, or delivery by courier, to the respective addresses set forth below:
<PAGE> 5
IF TO THE SUBSCRIBERS FOR SHARES: To their respective addresses as specified in
their Subscription Agreements.
THE COMPANY:
Southeast Commerce Holding Company
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
Attention: Richard A. Parlontieri
WITH A COPY TO: Nelson Mullins Riley & Scarborough, LLP
Suite 1400
999 Peachtree Street, NE
Atlanta, Georgia 30309
Attention: Neil E. Grayson, Esq.
THE ESCROW AGENT: The Bankers Bank
2410 Paces Ferry Road
600 Paces Summit
Atlanta, Georgia 30339
Attention: Mr. William R. Burkett
Senior Vice President
THE SALES AGENT: Banc Stock Financial Services, Inc.
1105 Schrock Road, Suite 437
Columbus, Ohio 43229
WITH A COPY TO: Carlile Patchen & Murphy, LLP
366 East Broad Street
Columbus, Ohio 43215
Attention: Andrew J. Federico
9. REPRESENTATIONS OF THE COMPANY. The Company hereby acknowledges that
the status of the Escrow Agent with respect to the offering of the Shares is
that of agent only for the limited purposes herein set forth, and hereby agrees
it will not represent or imply that the Escrow Agent, by serving as the Escrow
Agent hereunder or otherwise, has investigated the desirability or advisability
in an investment in the Shares, or has approved, endorsed or passed upon the
merits of the Shares, nor shall the Company use the name of the Escrow Agent in
any manner whatsoever in connection with the offer or sale of the Shares, other
than by acknowledgment that it has agreed to serve as Escrow Agent for the
limited purposes herein set forth.
<PAGE> 6
10. GENERAL.
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Georgia.
(b) The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
(c) This Agreement sets forth the entire agreement and understanding of
the parties with regard to this escrow transaction and supersedes all prior
agreements, arrangements and understandings relating to the subject matter
hereof.
(d) This Agreement may be amended, modified, superseded or canceled,
and any of the terms or conditions hereof may be waived, only by a written
instrument executed by each party hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any part at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. No waiver in any one or more instances by
any part of any condition, or of the breach of any term contained in this
Agreement, whether by conduct or otherwise, shall be deemed to be, or construed
as, a further or continuing waiver of any such condition or breach, or a waiver
of any other condition or of the breach of any other terms of this Agreement.
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) This Agreement shall inure to the benefit of the parties hereto and
their respective administrators, successors and assigns. The Escrow Agent shall
be bound only by the terms of this Escrow Agreement and shall not be bound by or
incur any liability with respect to any other agreement or understanding between
the parties except as herein expressly provided. The Escrow Agent shall not have
any duties hereunder except those specifically set forth herein.
(g) No interest in any part to this Agreement shall be assignable in
the absence of a written agreement by and between all the parties to this
Agreement, executed with the same formalities as this original Agreement.
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
the date first written above.
COMPANY: ESCROW AGENT:
SOUTHEAST COMMERCE HOLDING THE BANKERS BANK
COMPANY
By: By:
-------------------------------- ----------------------------------------
Name: Richard A. Parlontieri Name: William R. Burkett
Title: Chairman and Chief Title: Senior Vice President
Executive Officer
SALES AGENT:
BANC STOCK FINANCIAL SERVICES, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
Agreement No. ____
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
Parties:
SOUTHEAST COMMERCE HOLDING CO.
and
PHOENIX INTERNATIONAL LTD., INC., a Florida Corporation
PHOENIX FSC, INC.
Dated. December 18,1997
<PAGE> 2
CONTENTS
<TABLE>
<S> <C> <C>
1.0 DEFINITIONS...............................................................................................1
2.0 LICENSE GRANT.............................................................................................2
3.0 TERM......................................................................................................3
4.0 TITLE.....................................................................................................3
5.0 PAYMENTS AND TERMS........................................................................................3
6.0 WARRANTIES................................................................................................4
7.0 PATENT AND COPYRIGHT INDEMNITY............................................................................4
8.0 CONFIDENTIALITY...........................................................................................5
9.0 CUSTOMER AND SOFTWARE SUPPORT SERVICES....................................................................5
10.0 IMPLEMENTATION............................................................................................6
11.0 TERMINATION...............................................................................................6
12.0 CUSTOMER OBLIGATIONS......................................................................................7
13.0 SOURCE CODE ESCROW........................................................................................7
14.0 GENERAL...................................................................................................7
</TABLE>
EXHIBIT LIST
Exhibit A Fees and Software Description
Exhibit B Designated and Rerrote Locations
Exhibit C Contact Person
Exhibit D Third Party Hardware and Licensed Software Configurations
<PAGE> 3
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
AGREEMENT NO. _________________ EFFECTIVE DATE:____________________
<TABLE>
<S> <C> <C>
PARTIES: Southeast Commerce Holding Co. (Hereinafter referred to as "Customer")
100 Galleria Parkway, Suite 400
Atlanta, GA 30339
Phoenix International Ltd., Inc. (Hereinafter referred to as "Phoenix")
Phoenix FSC, Inc.
500 International Parkway
Heathrow, Florida 32146
</TABLE>
The parties hereby agree as follows:
1.0 DEFINITIONS
1.1 "Conversion" shall mean conversion and formatting of Customer's
existing data for use with the Software.
1.2 "Customer Network" shall mean the local and wide area network
communication system, server, remote PC's and Software based on the
machine and technical specifications as set forth in Exhibit D.
1.3 "De-Conversion" shall mean the regeneration of the Customer's existing
data utilized by the Software into a generic format.
1.4 "Designated Location" is the street address of the server as specified
on Exhibit B., as modified from time to time bY written notice from
Customer, plus remote PC's connected to the server by local or wide
area network.
1.5 "Installation" shall mean the installation in an executable format of
the Software on the Customer System at the Designated Location and all
Remote Locations.
1.6 "Implementation" shall mean the Installation and Conversion of the
Customer data for use by the Software.
1.7 "Implementation Date" shall be the last day of the month in which
Phoenix provides Customer with notice that the Software is installed
and the Conversion is complete.
1.8 "Implementation Period" shall be the period from the Effective Date
until the earlier of (i) the Implementation Date or (ii) the date one
hundred eighty (180) days after the Effective Date.
1.9 'Documentation" shall mean all documentation generally provided to
Phoenix's customers with the Software.
1.10 "Licensed Products" shall mean collectively the Software and
Documentation.
1.11 "Software" shall mean Phoenix's Retail Banking System software and
Third Party software, as described in Exhibit A, in object code form
and all updates, modifications, enhancements or revisions supplied by
Phoenix, as part of Customer and Software Support services.
<PAGE> 4
1.12 "Remote Locations" shall mean the street addresses listed in Exhibit B
as may be modified from time to time by written notice from Customer to
Phoenix, where, where PCs/workstations are connected to the Software
through the Customers local and wide area networks.
1.13 "Use" shall mean the reading into memory of the Software and the
execution of such Software, in whole or in part, by the Customer
Network for the Customers own data processing. Use of the Software
shall be confined to the United States of America, unless otherwise
agreed in writing by Phoenix. Commencement and effectiveness of
Customers license of the Licensed Products is not delayed or contingent
based on the delivery or completion of any related or other services,
including Implementation, and Customer Software Support.
1.14 "Related Expenses" shall mean reasonable travel and other reasonable
out-of-pocket expenses incurred in Implementation and/or Customer and
Software Support, including (without limitation) file conversion costs;
optional products, services, or hardware requested or authorized by
Customer shipping charges; courier or delivery charges; tape, cartridge
or diskette costs; or non-voice. telephone or communication costs not
already covered -as part of Customer and Software Support.
2.0 LICENSE GRANT
2.1 Phoenix hereby grants to: Customer a non-exclusive nontransferable
license to Use Software on the Customer Network and to use the
Documentation in support of the Software during the term and pursuant
to the terms and conditions of this Agreement. Phoenix will provide one
copy of the Software and Documentation.
2.2 Customer may copy the Software and the Documentation provided to
Customer in machine readable form into machine readable or printed form
to provide sufficient copies to support the Customer's Use of the
Software as authorized under this Agreement Customer shall not make any
other copies of the Software, except for testing, backup, or archive
purposes. Customer may make unlimited copies of the Documentation,
subject to the provisions of Section 4.0 and 9.0. Customer shall
maintain a record of the number and location of all copies of the
Software and Documentation; and a copy of that record will be provided
to Phoenix upon request.
2.3 Customer may transfer the Software to: (a) A backup machine when the
Customer's server or any associated machine elements required for Use
of the Software are temporarily inoperable or unusable; or, (b) Another
machine for disaster recovery testing (whir-h may occur concurrent with
normal Use of the Software to process Customer's data on Customer
Network), or another machine for actual disaster recovery and
processing in the event the Customer Network is non-functional due to
the occurrence of disaster.
2.4 The License herein granted is subject to the following restrictions and
limitations:
2.4.1 Customer may Use the software to process only its own data or
the data of the Customer Group. For such purpose, the *Customer
Group" means a subsidiary or affiliate of Customer, the parent
corporation of Customer, and any holding company of which
customer is a subsidiary Collectively the "Customer Group"),
except that Customer may process the data only of such members
of the Customer Group for which Customer paid or pays, prior to
commencement of processing for such members of the Customer
Group, License Fees at. all times sufficient for their
aggregate asset size calculated in combination with the asset
size of Customer. For the purpose of this subsection, an
affiliate will mean a corporation that is more than fifty
percent (50%) owned directly or indirectly by the parent
corporation of a Customer, a subsidiary shall be a corporation
of which Customer directly or indirectly owns more than fifty
percent (50%), and a parent corporation shall be a corporation
that directly or Indirectly owns more than fifty percent (50%)
of Customer, but only so long as such entities continue to
qualify as such an affiliate, subsidiary or parent corporation.
2.4.2 Customer shall not translate, reverse engineer, de-compile,
interpret or disassemble the Software. Customer shall not
transfer, distribute, sell, lease, or assign the Licensed
Products except as expressly authorized in this Agreement.
Customer shall not make any modifications or additions to the
Software or Documentation without the prior written con-sent of
Phoenix.
2
<PAGE> 5
3.0 TERM
This Agreement and the license granted herein shall be for an initial
term commencing on the Effective Date and continuing for a period of
five (5) year from the last day of the Implementation Period (the
"Initial Term"). This Agreement shall be automatically renewed for an
Additional one (1) year periods uril6ss either party notifies the other
of its desire to not renew this Agreement more than six (6) months
prior to the last day of the Initial Term or any renewal period.
4.0 TITLE
Phoenix represents and warrants to Customer that it owns all right,
title and interest in or has sufficient rights to license all of the
Software. Customer acknowledges that the Licensed Products are either
owned or licensed by Phoenix, that neither legal nor equitable title to
the Licensed Products passes to Customer pursuant to this Agreement,
and that the Licensed Products contains trade secrets of Phoenix.
Customer shall ensure that copyright notices or other legends contained
in or on any copies of the Licensed Products remain in or on the
original and any copies reproduced by Customer- AJI copies,
modifications and additions made by Customer of or to the Software and
Documentation shall become the property of Phoenix.
5.0 PAYMENTS AND TERMS.
5.1 The fees and charges for products and services to be provided under
this Agreement are set forth in Exhibit A. All amounts due shall be
paid in U.S. dollars.
1) An initial one-time License Fee for the license of the Software
is due upon execution of this Agreement by Customer. The
License Fee is for the delivery by Phoenix of the Software in
its unmodified form. The License Fee is calculated based upon
asset size of Customer and any included Customer Group,
according to the schedule set forth in Exhibit A. Each time
Customer and the Customer Group, or any of them. merges, adds
affiliates or otherwise grows beyond the aggregate asset size
for which Customer has paid a License Fee, Customer agrees to
pay an upgrade fee equal to the then current difference in
tiers.
2) An initial one-time implementation Fee for Phoenix's
Implementation services is due upon execution of this Agreement
by Customer. Phoenix shall be entitled to additional
Implementation Fees, to be paid in advance, if Implementation
is required whenever Customer or the Customer Group merges,
adds affiliates, etc.
3) A Customer and Software, Support Fee is due on the
Implementation Date and each .anniversary thereof for so long
as the license to the Software is in effect or Customer
continues to use the Software.
4) Customer agrees, in addition, to pay Related Expenses upon
receipt of Phoenix's invoices
5.2 All invoices shall be due and payable not later than fifteen (15) days
following the date of invoice- Sums overdue shall bear interest at the
lesser of (i) I 1/20/o per month, or (11) the highest rate allowed
under applicable law.
5.3 Amounts payable to Phoenix hereunder are payable in full without
deduction, or set off, and shall be in addition to all sales, use or
other taxes or duties, which Customer shall also be responsible for
paying. Customer shall duly and timely pay all taxes and duties,
however designated, levied or based upon amounts payable to Phoenix
hereunder (exclusive of United States Federal, state or local taxes
based upon the net income of Phoenix) or the license, use or possession
of the Licensed Products. Customer agrees to indemnify and hold Phoenix
harmless from any such taxes or duties which any federal, state or
local taxing authority requires Phoenix to pay.
3
<PAGE> 6
Customer may challenge the applicability of any such tax only after
paying the tax or giving Phoenix other satisfactory assurances of
compliance.
5.4 Phoenix reserves the right, to adjust its prices at any time subject to
30 days advanced notice. Such changes shall have no retroactive effect
on Customer. The Customer and Software Support Fee shall: not be
increased by more than the greater of 7% per annum or the annual change
in the CPI, Urban Wage Earners and Clerical Workers, All Cities (1982 =
100%).
6.0 WARRANTIES
6.1 Phoenix warrants, for a period of six (6) months after delivery, the
original unmodified version of the Software shall conform in all
material respects with any program descriptions included in
corresponding Documentation provided by Phoenix. Phoenix does not
warrant that the Licensed Products will operate without interruption or
be error-free. In the event Customer discovers any defect or error
covered by the warranty, Customer agrees to provide Phoenix sufficient
detail to enable Phoenix to recreate the defect or error. Phoenix
agrees. as its exclusive obligation (except as covered outside the
foregoing warranty as part of Customer and Software Support) for such
defect or error, to correct the defect or error through all reasonable
efforts. Phoenix shall not be responsible for unreported error or
errors caused by negligence or nonconformance with the Phoenix Hardware
and Network Services Guide. Customer shall be limited to the warranties
provided by third-party licensors or manufacturers with respect to
third-party software or equipment that may be provided by Phoenix.
6.2 Phoenix's total liability to Customer or any member of the Customer
Group under any provision of this Agreement (except 7.0) or for any and
all claims, losses or damages relating to the Licensed Products
(whether based on tort, contra(,t, or any other theory) shall be
limited to the amount actually paid by Customer to Phoenix for the
Licensed Products giving rise to the liability. The parties acknowledge
that each of them relied upon the inclusion of this limitation in
consideration of entering into this Agreement.
6.3 EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, PHOENIX SPECIFICALLY DISCLAIMS
ANY OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE.
6.4 IN NO EVENT SHALL PHOENIX OR ITS LICENSORS BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE,
OR INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT, AND
IN SUCH RESPECT CUSTOMER AND CUSTOMER GROUP SHALL NOT BE ENTITLED TO
DAMAGES BASED ON LOSS OF PROFIT, LOSS OR INTERRUPTION OF DATA OR
COMPUTER TIME, ALTERATION OR ERRONEOUS TRANSMISSION OF DATA, EVEN IF
PHOENIX IS ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
7.0 PATENT AND COPYRIGHT INDEMNITY
Phoenix, at its own expense, shall defend, indemnify, and hold harmless
Customer and any members of the Customer Group from any legal action
based upon a claim that any of the Licensed Products infringes the
patent copyright license or other proprietary right of a third party,
provided that Phoenix is notified promptly of such claim when it is
first anticipated, threatened or asserted. Phoenix shall have the sole
right to control the defense and disposition of any such claim or
action. Phoenix shall have no obligation to defend Customer or to pay
costs, damages or attorney's fees for any claim based upon use of other
than a current unaltered version of the Licensed Product to the extent
that such infringement would have been avoided thereby. Recourse for
infringement involving software or equipment supplied to Phoenix by
third-party licensors or manufacturers shall be limited to
indemnification provided by those third parties. This Section 7 states
Phoenix's sole obligation with respect to title and infringement
matters.
4
<PAGE> 7
8.0 CONFIDENTIALITY
8.1 Customer understands and agrees that the Licensed Products and any
related information ('Confidential Information"), contains valuable
intellectual property and trade secrets of Phoenix and embody
substantial creative efforts and confidential information, ideas and
expressions belonging to Phoenix. Where required by the circumstances,
such Confidential Information may include software, documentation or
information provided to Phoenix by third parties subject to obligations
of confidentiality.
8.2 Phoenix understands and agrees that in the performance of its duties
under this Agreement, Phoenix may gain access to certain materials and
data relating to Customer's business ('Confidential Information").
8.3 Both parties shall at all times observe reasonable care in maintaining
complete confidentiality of the other party's Confidential Information,
and shall not permit or authorize access to or disclosure of the other
party's Confidential Information to any person or entry other than (i)
employees, (II) accountants for auditing purposes, (iii) independent
contractors, provided that Phoenix shall have the right to approve
(approval not to be unreasonably withheld) in advance all contractors
who are given access to the Software or any Phoenix Confidential
Information and (iv) governmental regulatory authorities, to the extent
required for compliance with applicable laws, and subject to such
protective measures as may be available to preserve the confidentiality
of such information following disclosure. For purposes of this
Agreement 'reasonable care' shall mean a standard no less than the
standard of care each party exercises in protecting its own
confidential property. Each party shall promptly notify the other in
writing of the existence of any unauthorized knowledge, possession or
use of the Confidential Information by any person or entity.
8.4 Confidential Information shall not include information which (i) is in
the public domain, (ii) is obtained from a third party who acquired
such confidential information independently, without reliance on other
Confidential Information, and free of any obligation to the other party
or (iii) is independently developed by either party without reference
to Confidential Information of the other party, as demonstrated by
written documentation.
9.0 CUSTOMER AND SOFTWARE SUPPORT SERVICES
9.1 Effective immediately after the Implementation Date, Phoenix shall
provide certain software maintenance, software operation and use
services and system enhancements ("Customer and Software Support') for
the fee hereinafter set forth, which services-.
9.1.1 Include enhancements to the Software and updates to
Documentation generally made available to all of Phoenix's
Customers. Ensure that the Licensed Software complies with the
minimum regulatory requirements of U-S. Federal Agencies having
jurisdiction over the operation of Customer. Enhancements
include modifications or additions made to improve upon
existing features and operations performed by the Software.
9.1.2 Include reasonable maintenance and telephone consultation
related to the Licensed Products, Phoenix will correct or
replace software and/or provide services necessary to remedy
any critical or noncritical programming error that is
attributable to Phoenix- Such correction, replacement, or
services will be promptly undertaken by Phoenix after the
Customer has identified and notified Phoenix of any such error,
which notice shall be in accordance with Phoenix reporting
procedures. Phoenix will use reasonable commercial efforts to
telephonically diagnose- (i) any errors or malfunctions in the
system, or (ii) malfunctions in the system caused by operator
error, and advise Customer of possible corrective measures that
the Customer may take. Phoenix will also clarify operating
instructions contained in the Documentation delivered with the
programs.
9.1.3 Include direct first line support of third party software and
coordination of all other support with the third party licensor
on behalf of Customer.
5
<PAGE> 8
9.1.4 Include telephonic support 24 hours per day, 365 days per year
via beeper access to support personnel, Normal office hours are
Monday through Friday. 8:00 AM to 5:00 PM Eastern Standard
Time.
9.2 If Phoenix, after using its best telephonic diagnostic efforts, shall
determine that it requires documentation of problems, errors or
malfunctions in writing, Customer agrees to provide assistance in
identifying and detecting problems, errors or malfunctions in
sufficient detail and with sufficient supporting documentation and
information to enable Phoenix to recreate the problem, error or
malfunction.
9.3 Customer and Software Support is limited to Hardware and Customer
Network configurations supported by Phoenix as stated in the Phoenix
Network and Configuration Standards Guide. Phoenix agrees to give
Customer at least six (6) months advance notice if an applicable
configuration will no longer be supported.
10.0 IMPLEMENTATION
10.1 Phoenix shall conduct an implementation planning session at a location,
date and time mutually agreed to by both parties (the "Implementation
Planning Session") to develop a mutually acceptable Implementation
Schedule. Customer shall make available up to five (5) of its
appropriate personnel for the Implementation Planning Session.
10.2 Phoenix will make all reasonable efforts to effect the Implementation
of the Software in accordance with the implementation Schedule; but,
Phoenix shall not be liable to the Customer or any other person for any
damages, in the event Implementation is not completed within such time.
11.0 TERMINATION
11.1 TERMINATION BY CUSTOMER. Customer may terminate the License at any time
after the Initial Term or any renewal term upon three months advance
written notice to Phoenix.
11.2 TERMINATION BY PHOENIX. Phoenix shall have the right to terminate the
License upon the occurrence of any of the following events:
11.2.1 Customer breaching or failing to perform any provision of this
Agreement and the same is not cured within ten (10) days after
Customer's receipt of notice in writing from Phoenix specifying
such breach or failure; or
11.2.2 Customer not implementing the most recent version of the
Licensed Products within ninety (90) days of the date such
version is made available to Customer; or 1 i.2.3 Customer
failing to pay the annual Customer and Software Support Fee.
11.3 EFFECT OF TERMINATION
11.3.1 Except for breaches of Paragraphs 2.4, 4.0 or 8 by Customer,
Phoenix shall allow Customer up to one hundred eighty (180)
days to continue to Use the Licensed Products; provided that
Customer has paid and continues to pay all amounts due. At the
end of such period of time (and in all other instances
immediately upon termination) Customer shall return or destroy
all copies of the Licensed Products; if Phoenix so requests,
Customer shall certify it has completed such action. Customer
grants Phoenix the right to enter Customers business premises
during regular business hours to retrieve all Licensed Products
or verify the destruction of the same by Customers personnel.
11.3.2 No monies shall be refundable upon termination of the License,
whether such termination is by Customer or Phoenix.
6
<PAGE> 9
11.3.3 Phoenix agrees to provide reasonable De-Conversion Assistance
for which Customer agrees to pay in advance to Phoenix a
de-conversion fee equal to one half (1/2) the then applicable
annual Customer and Software Support Fee ('De-Conversion Fee').
11.3.4 All obligations of confidentiality and payment of monies due
shall survive termination.
11.4 The rights and remedies of Phoenix included in this Section shall not
be exclusive and are in addition to any other rights and remedies
provided by law or equity.
12.0 CUSTOMER OBLIGATIONS
12.1 Customer shall appoint a Contact Person, on Exhibit 'C", to service as
the local point of communication between Phoenix and Customer. Customer
may change the Contact Person upon written notice to Phoenix.
12.2 Customer agrees to acquire and maintain Customer Network at the
Designated Location by the required dates in the Implementation
Schedule. Customer shall provide an 'on-line telecommunications link
with a telephone modem in order to provide digital communication with
Phoenix's systems.
12.3 Customer shall add all corrections or enhancements ("System Release')
provided by Phoenix for the Licensed Products within twenty-five (25)
days of availability.
12.4 Customer shall keep its personnel trained in the operation of the
Licensed Products and Customer Network.
12.5 Customer shall pay the annual Customer and Software Support Fee for so
long as Customer continues to hold or use the Licensed Products.
13.0 SOURCE CODE ESCROW
13.1 Phoenix will deposit the most current version of the source code for
the Phoenix Banking System with an independent escrow agent In the
event that Phoenix, or its successor, shall cease to provide Customer
and Software Support, and Customer has paid its Customer and Software
Support Fee, Customer shall have the right to obtain, for its own sole
and exclusive use, with no right of transfer, a single copy of such
source code from the escrow agent, subject to the License Agreement.
14.0 GENERAL
14.1 Notices shall be deemed given as of the date deposited in the U.S. mail
(with provision for confirmation of receipt, if outside U.S.). Either
party may change ft address by written notice to the other.
14.2 This Agreement shall not be assignable or transferable by Customer.
This Agreement may be assigned or conveyed by Phoenix without any prior
consent or approval, pursuant to a sale or merger of the company or a
major division. Subject to the foregoing, this Agreement shall inure to
the benefit of and be binding upon the parties, their successors and
authorized assigns.
14.3 The failure of either party to enforce any term of this Agreement shall
not constitute a waiver of either party's right to enforce each and
every term of this Agreement.
14.4 If either party brings an action under this Agreement (including
appeal), the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs. Should any provision of this Agreement be
held by a court of competent jurisdiction to be unenforceable, the
remaining provisions of this Agreement shall not be affected or
impaired thereby. This Agreement shall be governed by the laws of
Florida.
14.5 Neither party shall be in default by reason of any failure in tie
performance of this Agreement (other than a failure to make payment
when due or to comply with restrictions upon the Use of the Licensed
Products) if such
7
<PAGE> 10
failure arises out of any act event or circumstance beyond the
reasonable control of such party, whether or not otherwise foreseeable.
The party so affected will resume performance as soon as reasonably
possible.
14.6 The captions appearing in this Agreement are inserted only as a matter
of convenience and in no way limit the scope or affect the meaning of
any section,
14.7 This Agreement constitutes the entire agreement between the parties and
supersedes all prior understandings and agreements between them
regarding the Licensed Products, and may not be modified except in
writing signed by authorized representatives of both parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the dates indicated.
PHOENIX INTERNATIONAL LTD., INC. SOUTHEAST COMMERCE HOLDING COMPANY
PHOENIX FSC., INC.
By: Bahram Yusefzadeh By: /s/ Richard A. Parlontieri
----------------------------- ----------------------------------------
Date: December 31, 1997 Print Name: Richard A. Parlontieri
--------------------------- --------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
Date: December 30, 1997
--------------------------------------
EXECUTION BY PHOENIX- this Agreement shall not be binding until the
same has been executed by an Executive Officer of Phoenix.
8
<PAGE> 11
PHOENIX INTERNATIONAL LTD., INC.
ADDENDUM
TO
SOFTWARE LICENSE AGREEMENT
The following is an ADDENDUM TO: Agreement No.
------------------
Effective Date:
----------------
<TABLE>
<S> <C> <C>
between PARTIES: Southeast commerce Holding Company, Inc. (Hereinafter referred to
100 Galleria Parkway, Suite 400 as "Customer")
Atlanta, Georgia 30339
Phoenix International Ltd., Inc. (Hereinafter referred to
Phoenix FSC, Inc. as "Phoenix")
500 International Parkway
Heathrow, Florida 32746
</TABLE>
The parties hereby agree that the contents of this Addendum will serve as part
of the Software License Agreement referred to above. In the event of any
conflict between the terms of this Addendum and the original terms of the
Agreement this Addendum will control.
5.0 PAYMENT AND TERMS.
5.1 The fees and charges for products and services to be provided under this
Agreement are set forth in Exhibit A. All amounts due shall be paid in
U.S. dollars.
1) An initial one-time License Fee for the license of the Software
is due in accordance with the following Payment Schedule. The
License Fee is for the delivery by Phoenix of the Software in its
unmodified form. The License Fee is calculated based upon asset
size of Customer and any included Customer Group. according to the
schedule set forth in Exhibit .k Each time Customer and the
Customer Group, or any of them, merges, adds affiliates or
otherwise grows beyond the aggregate asset size for which Customer
has paid a License Fee, Customer agrees to pay an upgrade fee
equal to the then current difference in tiers.
2) An initial one-time Implementation Fee for Phoenix's
Implementation services is due in accordance with the following
Payment Schedule. Phoenix shall be entitled to additional
Implementation Fees, to be paid in advance, if Implementation is
required whenever Customer or the Customer Group merges, adds
affiliates, etc.
3) A Customer and Software Support Fee is due on the
Implementation Date and each anniversary thereof for so long as
the license to the Software is in effect or Customer continues to
use the Software.
<PAGE> 12
4) A Professional Services Fee is due in accordance with the
following Payment Schedule.
5) Customer agrees, in addition, to pay Related Expenses upon
receipt of Phoenix's invoice.
PAYMENT SCHEDULE
The following payment schedule IS for the Phoenix License Fee,
Implementation Fee and Professional Services.
<TABLE>
<S> <C>
Due upon execution of this Agreement by Customer: $50,000
Due on January 30, 1998: $50,000
Due on February 27, 1998: $50,000
Due along with balance after opening: $50,000
The balance of the License Fee, Implementation Fee and Professional Services is due $113,500
within ten (1 0) days of the bank opening its doors for business:
</TABLE>
Except as expressly provided in this Addendum, all provisions of the Agreement
shall remain in full force and effect and shall apply for all purposes.
AGREED TO AND ACKNOWLEDGED:
<TABLE>
<CAPTION>
PHOENIX INTERNATIONAL, INC. SOUTHEAST COMMERCE HOLDING
COMPANY, INC.
<S> <C>
By: /s/ Bahram Yusefzadeh By: /s/ Richard A. Parlontieri
------------------------------------------ ------------------------------------------
Title: Chairman and Chief Executive Officer Title: Chairman and Chief Executive Officer
--------------------------------------- ---------------------------------------
Date: December 31, 1997 Date: December 30, 1997
---------------------------------------- ----------------------------------------
</TABLE>
<PAGE> 13
EXHIBIT A
FEES* AND SOFTWARE DESCRIPTION
------------------------------
1. LICENSE FEES:
A. This license fee is based upon the asset size of the customer.
PHOENIX BANKING SYSTEM LICENSE $125,900
Relationship Information Manager
Deposit Processing
Loan Processing
Integrated General Ledger
Integrated Teller System
Integrated Photo and Signature Imaging
Integrated Customer Profitability
Executive Information System
Budgeting
PHOENIX INTERNET BANKING SYSTEM LICENSE $ 43,500
PHOENIX SAFE DEPOSIT BOX SYSTEM LICENSE $ 4,500
TOTAL INITIAL LICENSE FEES: $173,900
========
*Additional License Fees for Phoenix Interfaces may BE required
2. PROFESSIONAL SERVICES:
Custom Web Site Development $ 30,000
========
TOTAL PROFESSIONAL SERVICES FEES $ 30,000
========
3. IMPLEMENTATION FEES:
(PLUS OUT-OF-POCKET EXPENSES)
Web Site Implementation $ 9,600
Phoenix Safe Deposit Box $ 1,500
Phoenix Internet Banking $ 9,000
Phoenix Banking System $ 89,500
Basic Training Charges
(Including the following classes):
SYSTEM ADMINISTRATION (9 days for 3 people)
- Bank Controls
- RIM Controls
- Deposit Controls
- Loan Controls
- Financial Controls
- Teller Controls
ADDITIONAL PEOPLE ATTENDING - $1,500 each
<PAGE> 14
<TABLE>
<S> <C>
ACCOUNT PROCESSING (15 Training Days in Bank)
Account Processing (6 days)
RIM & deposits (5 days)
RIM & Loans (5 days)
Nightly Processing (2 days)
Back office Processing (1 day)
G/I Processing (2 days)
Teller Processing (3 days)
OPTIONAL TRAINING
EIS & Budgeting (3 days) $ 3,600
Budgeting (1 day) $ 1,200
Report Writing (2 days) $ 2,400
ADDITIONAL CLASSES $ 1,500/day/Instructor
TOTAL INITIAL IMPLEMENTATION FEES $109,600
========
3. ANNUAL CUSTOMER AND SOFTWARE SUPPORT FEE
PHOENIX BANKING SYSTEM LICENSE $ 26,180
PHOENIX INTERNET BANKING SYSTEM LICENSE $ 8,700 (1)
PHOENIX SAFE DEPOSIT BOX SYSTEM LICENSE $ 900
TOTAL INITIAL ANNUAL CUSTOMER AND
SOFTWARE SUPPORT FEES $ 34,780 /YEAR
</TABLE>
* ALL FEES OTHER THAN IMPLEMENTATION FEES ARE SUBJECT TO
INCREASE BASED ON INCREASE IN AGGREGATE ASSET SIZE OF CUSTOMER
GROUP
** Additional Customer and Software Support Fees may be required
for Phoenix Interface License.
(1) THERE IS A $5.00 PER CUSTOMER/YEAR USAGE CHARGE.
4. THE COMPONENTS OF THE LICENSED SOFTWARE AND THE LICENSED
DOCUMENTATION:
Customer & Product Controls
Administrative Controls
Customer Processing
Deposit Processing
Loan Processing
Teller Processing
Nightly Processing
Safe Deposit Box
Internet Banking
General Ledger Administration & Maintenance
Executive Information System
Data Dictionary: Deposits
Data Dictionary: Loans
Data Dictionary: Customer Information
<PAGE> 15
Report Dictionary
Budgeting
THE LICENSED PROGRAM DESCRIPTIONS ARE LOCATED IN THE LICENSED
DOCUMENTATION.
Interfaces-. All necessary interfaces should be identified at the
Implementation Planning Session. Additional fees, if any, will be presented to
the bank subsequent to the Implementation Planning Session.
5. THIRD PARTY SOFTWARE
The following software programs are licensed under this Agreement, but owned by
third parties. Initial calls for support should be made to Phoenix unless the
program is marked with an asterisk.
Sybase
6. LICENSE FEE TIERS
The License Fee is calculated based upon asset size of Customer and any included
Customer Group, according to the following schedule. Each time Customer and the
Customer Group, or any of them, merges, 2dds affiliates or otherwise grows
beyond the aggregate asset size for which Customer has paid a License Fee,
Customer agrees to pay an upgrade fee equal to the then difference in tiers.
BASE PHOENIX BANKING SYSTEM
Bank Assets Tiers
-----------------
De Novo - 149.9M
$15O - 149.9M
$200 - 249.9M
$250 - 299.9M
$300 - 399.9M
$400 - 499.9M
$500 - 599.9M
$600 - 699.9M
$700 - 799.9M
$800 - 899.9M
>$900M
<PAGE> 16
EXHIBIT B
DESIGNATED AND REMOTE LOCATION(S):
DESIGNATED LOCATION(S):
1. To Be Determined
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------PHONE
-----------------------------------------------FAX
2.
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------PHONE
-----------------------------------------------FAX
REMOTE LOCATION(S):
1.
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------PHONE
-----------------------------------------------FAX
2.
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------PHONE
-----------------------------------------------FAX
<PAGE> 17
EXHIBIT C
CONTACT PERSON
CONTACT PERSON: Richard A. Parlotieri
-------------------------------
ADDRESS: 100 Galleria Parkway: Suite 400
-------------------------------
Atlanta, GA 30339
-------------------------------
PHONE: (770) 956-4034
-------------------------------
FACSIMILE: (770) 956-4035
-------------------------------
<PAGE> 18
EXHIBIT D
PRELIMINARY HARDWARE AND LICENSED SOFTWARE CONFIGURATIONS
1. NT SERVER REQUIREMENTS
Customer agrees to provide and maintain a Hewlett-Packard server at a
size recommended by Phoenix, or greater, and consistent with the
technical guidelines in the Phoenix Network and Configuration Standards
Guide.
Customer agrees to acquire the NT version of Sybase from Phoenix
required as part of the Phoenix Retail Banking Product solution and
agrees to maintain the most current version of Sybase, as specified by
Phoenix, in order to support the Phoenix Product for the life of the
contract. In the event that the Customer fails to adhere to this
standard, Phoenix may, at its option, discontinue any and all support
services in conjunction with the Phoenix Retail Banking Product until
Customer complies with the current version Standard.
<PAGE> 1
EXHIBIT 10.6
BANC STOCK FINANCIAL SERVICES, INC.
A Subsidiary of The Banc Stock Group
February 20, 1998
Southeast Commerce Holding Company
100 Galleria Parkway, Suite 400
Atlanta, Georgia 30339
Attn: Mr. Richard Parlontieri
Chairman and Chief Executive officer
Dear Mr. Parlontieri:
This will confirm our intent to act as the underwriter in connection
with the proposed public offering of securities (the "Offering") issued by
southeast Commerce Holding Company the "Company"). it is contemplated that the
Banc Stock Financial Services, Inc. ("BSFS") shall underwrite on a beet efforts
basis, up to 1,000,000 common shares ("Shares") at an offering price of
approximately $10.00 per share for an aggregate public offering of approximately
$10,000,000 as set forth below.
1. The Company and BSFS shall agree upon a time table for the filing of
an Amended Registration Statement, and Amendments thereto, Blue Sky filings and
all other steps necessary to effectuate the proposed public offering at a date
acceptable to BSFS. An Amended Registration Statement, together with exhibits
covering the Shares proposed to be offered will be carefully prepared by the
Company with the cooperation of BSFS and filed with the United States Securities
and Exchange Commission ("SEC"). All financial statements contained in the
Registration Statement, as amended from time to time, will be in form and
content satisfactory to BSFS and to BSFS's counsel, and will have been prepared
and reported on by independent certified public accountants satisfactory to
BSFS. The proposed Amended Registration Statement will be submitted to BSFS and
to BSFS's counsel as soon as possible but not later than 5 days before the
Company proposes to file such Registration Statement with the SEC. The content
of any oral comments and copies of all comment letters shall immediately be
supplied to BSFS and its counsel and all amendments to the Registration
Statement shall be submitted to BSFS and its counsel for its review prior to the
time they are filed with the SEC.
2. The Underwriting Agreement and Selected Dealer Agreement shall be
prepared by counsel to BSFS and such counsel shall make all required filings
with the National Association of
<PAGE> 2
Southeast Commerce Holding Company, Inc.
February 20, 1998
Page 2
Securities Dealers, Inc. All corporate proceedings undertaken by the Company and
any other legal matters which relate to the public southeast offering and other
related transactions shall be satisfactory in all material respects to counsel
for BSFS.
3. It is understood that the proposed Underwriting Agreement will
provide for reciprocal indemnification between the Company and BSFS as to
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
4. It is understood and agreed between the Company and BSFS that all
documents and other information relating to the Company's affairs will be made
available upon request to BSFS and its attorneys at the offices of BSFS or at
the office of BSFS's attorney and copies of any such documents will be furnished
upon request to BSFS or its attorneys. Without limiting the generality of the
foregoing, the following documents must be made available as soon as possible:
articles of incorporation and amendments, bylaws and amendments; minutes of
meetings of the Company's incorporators, directors, committees, and
shareholders; all financial statements; and correct copies of all material
contracts to which the Company is a party. The Company will furnish BSFS at the
earliest practicable date a business plan showing projected cash flow (or
deficiencies) covering a three year period and reconcile to the proposed use of
proceeds section of the prospectus. in addition, the Company will provide BSFS
with unaudited monthly financial data concerning the Company from this date
until termination of the offering.
5. The properties owned or held under option by the Company, the
capital structure of the Company immediately preceding the public offering, the
contemplated dilution to the pubic investor, and the Company's business plan
shall be acceptable to BSFS. it is contemplated that the Shares held by the
public upon completion of the public offering will represent approximately
seventy percent of the outstanding Shares. The Shares underlying options and
warrants shall be deemed outstanding for this purpose.
6. It is understood and agreed between the Company and BSFS that it
shall be tihe obligation of the Company to qualify the sale of the Company's
Shares in such states as may reasonably be designated by BSFS. The officers,
directors and promoters of the Company will comply with applicable Blue Sky
escrow requirements, if any, including those pertaining to the escrow of Shares.
The cost of registration and fees of counsel in completing the applications and
in clearing the offering through the various state Blue Sky commissions or
authorities will be paid by the Company.
7. The gross underwriting discounts and commission, i.e. "gross
spread," will be 6.5 percent of the total gross proceeds raised in the Offering,
subject to the following:
<PAGE> 3
Southeast Commerce Holding Company, Inc.
February 20, 1998
Page 3
a. No commission shall be charged by BSFS on shares sold by the
Company directly to officers and directors at the public
offering price; and
b. A commission of 5.5% will be charged by BSFS on up to 250,000
shares purchased by persons introduced to BSFS by the Company
within 30 days of the date of this letter.
8. The Company will be responsible for paying all costs typically borne
by the issuer. These include, but are not limited to, the costs of preparing the
Registration Statement, all printing costs, filing and related expenses, the
costs of its attorneys and accountants, and all Blue Sky and related costs,
whether incurred by counsel to the Company or counsel to BSFS. in addition, the
Company will reimburse BSFS for its out-of-pocket expenses as discussed in
paragraph 9.
9. In addition to any fees that may be payable to BSFS hereunder and
the expenses to be borne by the Company pursuant to the foregoing and regardless
of whether the offering is consummated, the Company agrees to reimburse BSFS,
upon request made monthly, for its reasonable out-of-pocket expenses incurred in
connection with its engagement hereunder, including, without limitation, legal
fees, advertising, promotion, syndication, and travel expenses, provided,
however, that BSFS shall document such expenses to the reasonable satisfaction
of the Company and the Company shall approve all advertising and work. Unless
approved in writing by the Company, reimbursable underwriters legal fees and
disbursements related solely to the underwriting process will not exceed $25,000
for standard and customary legal counsel work and underwriters out-of-pocket
expenses will not exceed $40,000. Such approval shall not be unreasonably
withheld by the Company. Underwriters legal counsels work, if for matters
outside of the underwriting such as for regulatory and other work, will be
billed separately provided the Company is notified and the expenses are agreed
to in advance. Upon acceptance of this letter agreement by the Company, the
Company shall pay a non-refundable retainer to BSFS in the amount of $10,000.
10. Until the Underwriting Agreement has been negotiated and signed,
either the Company or BSFS, may at any time terminate further participation in
the offering, in which event no party shall have any liability hereunder, except
that the Company (a) will be responsible for the expenses and fees to be paid
and borne by the Company as provided above, and, (b) will reimburse BSFS for all
its out-of-pocket expenses, including, but not limited to, such costs as
telephone, fax, courier service, copying, accommodations, travel, direct
computer expenses, secretarial overtime and fees and disbursements of its legal
counsel. Expenses will not exceed the amount referenced in paragraph 9. The
Company shall reimburse BSFS within five days of such
<PAGE> 4
Southeast Commerce Holding Company, Inc.
February 20, 1998
Page 4
termination, unless BSFS terminates the agreement without good reason. The
Company's obligation under this paragraph shall survive the termination of this
agreement.
11. This Agreement shall be governed by the laws of the state of Ohio
without regard to any conflict of law provisions thereof, and may not be amended
or modified except in writing signed by each of the parties hereto. This Letter
Agreement shall be deemed made in Ohio. Any right to trial by jury with respect
to any claim or proceeding related to or arising from this engagement, or any
transaction or conduct in connection herewith, is waived. Any dispute arising
from the interpretation, validity or performance of this letter agreement or any
of its terms and provisions shall be submitted to binding arbitration in
Columbus, Ohio in accordance with the rules of the American Arbitration
Association or the National Association of Securities Dealers, Inc.
12. This Agreement and all rights and obligations thereunder shall be
binding upon and inure to the benefit of each party's successors, but may not be
assigned without the consent of each of the parties hereto, which consent shall
not be unreasonably withheld or delayed.
13. Pending completion of the Offering contemplated herein or the
earlier termination of this Agreement, the Company agrees that it will not
negotiate with any other underwriter or person relating to offerings of public
or private securities of the Company. The Company represents and warrants that,
except as disclosed to BSFS, it has not granted any other person any right to
underwrite or register shares thereof or agreed to pay any finders or financial
services fees in connection with this Offering.
14. The Company will provide BSFS with the right of first refusal f or
one year from the signing of the Underwriting Agreement to serve as a managing
underwriter on any public or private financing (debt or equity), or act as an
advisor on any merger, business combination, recapitalization or sale of some or
all of the equity or assets of the Company, (collectively, the "future
services"). In the event BSFS is engaged by the Company to provide such future
services, BSFS will be compensated as is reasonable and customary within the
industry.
<PAGE> 5
Southeast Commerce Holding Company, Inc.
February 20, 1998
Page 5
Please confirm your agreement to the foregoing by signing and returning
to us the enclosed copy of this letter. We look forward to working with you.
Very truly yours,
BANC STOCK FINANCIAL SERVICES, INC.
By:/s/ Michael E. Guirlinger, Vice President
-----------------------------------------
Michael E. Guirlinger, Vice President
Agreed to and accepted this 26th day of
February, 1998:
SOUTHEAST COMMERCE HOLDING COMPANY
By:/s/ Richard A. Parlontieri
-----------------------------------------
Richard A. Parlontieri
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference of our report dated December
31, 1997, relating to the financial statements of Southeast Commerce Holding
Company, in the Registration Statement on Form SB-2 and Prospectus, and to the
reference to our firm therein under the caption "Experts."
BRICKER & MELTON, P.A.
Duluth, Georgia
March 4, 1998
